Jonathan Lane comments on the wheat market

Continued uncertainty over the Russia/Ukraine crisis remains the key influence on global grain markets, which have steadied recently as diplomatic talks continue.

US values traded down slightly over the week, whilst Matif gained around €4. UK old crop futures slipped around £1.60/t.

Given the importance of Russia and Ukraine on the wheat market, conflict and ensuing sanctions could have a big effect on global values. But, assuming conflict is avoided, the underlying fundamentals are largely unchanged.

In the short term, wheat supply and demand remains tight. Russian wheat exports amounted to 24.3 mln t as of 10 February, down 24% year on year, as the new export quota to protect domestic supplies commenced this week.

EU soft wheat exports have risen slightly, reaching 17.3 mln t as of 13 Feb, up from 16.9 mln t year on year, with Algeria, China and Egypt remaining the top destinations.

Farm office FranceAgriMer lowered the country’s outlook for end-of-season wheat stocks to 3.58 mln t from 3.65 mln t in January, due to higher animal feed and food usage.

Further ahead, global supplies could rise, particularly those from the Black Sea region. SovEcon raised its estimate for Russia’s 2022 wheat harvest by 3.5 mln t to 84.8 mln t, after an ‘almost ideal’ winter for the crop.

Ukrainian farmers have planted 7.7 mln ha of winter crops for the 2022 harvest, up 5% year on year, with the winter wheat and triticale area reported at 6.5 mln ha.

However, France’s agriculture ministry reduced its forecast for the country’s wheat area, from 4.92 mln ha to 4.75 mln ha.

China is to boost farm support measures to safeguard the summer harvest and the nation’s ‘stable and healthy economic development’, which could potentially reduce its import requirements.

Turning to the current UK situation, delivery premiums, especially to more western and northern parts of the country, continue to firm.

December wheat imports were higher than expected, but the season-to-date (July-Dec) figure of 1.066mln t is down 28% year on year.

Conversely, domestic usage continues to show a rebound year on year and we envisage an increase from ethanol production due to start during Q1 2022.

UK new crop futures are virtually unchanged week on week, continuing to track US/EU markets.

Both old and new crop prices remain well above their long-term average. Whilst cost of production has increased, current values still represent good margin returns.

* For more detail on the wheat markets join Jonathan Lane and Freddie Humfrey on the ADM Agriculture YouTube channel 

Will Ringrose comments on the OSR market

Outside markets have been mixed following talk of Russia pulling troops back from the Ukrainian border, which eased concerns of an immediate conflict. Markets accordingly took back some risk premium.

CBOT soybeans continue to rally on dwindling South American crop prospects, despite showers across parts of Brazil and Argentina.

US crush rates for January from the US’s National Oilseed Processors Association came in below expectations yesterday. Soy oil stocks still remain high against expectations.

China has been buying further parcels of US soybeans. There were rumours that Chinese traders were selling off state reserves of beans and soy oil back into the market.

Oil markets continue to be very volatile. Crude oil continues to be the driver, although prices fell over 3% earlier in the week on reports of Russian troops moving away from the Ukraine border. Malaysian palm oil prices trade close to record highs, although these have eased in the last few sessions with rumours of increased production.

In Canada, temperatures remain very cold, but soil moistures remain good. Canola prices followed the complex up and down, although price swings have been less volatile. Crushers seem to be covered on the nearby positions and are happy to sit back for the time being.

Matif rapeseed rallied back to trade over €700, again following the wider complex up. Crush margins are still pressured with the firmer energy prices adding to decent seed coverage on the nearby positions.