Jonathan Lane, ADM Agriculture’s head of grain trading, comments on the wheat market

Coronavirus continues to dominate the markets. Its continued spread is raising concerns over global economies, which in turn are exerting pressure on equity, energy and commodity markets.

US wheat prices are down around $10/t on the week following yesterday’s announcement by US health protection agency CDC that coronavirus will probably spread into the US. A firmer dollar also helped push equity and commodity prices lower.

China will waive import duties on numerous US agricultural products from 2 March, which the US trade hopes will spark buying interest. How much remains to be seen.

USDA’s Outlook Forum projected the US all-wheat acreage for 2020 would fall to a record low of 45 mln acres, with production set to fall 4% year on year and 2020/21 US closing stocks to decline 17% . This was deemed supportive to prices.

Agricultural consultancy SovEcon forecasts Russia’s 2020/21 wheat production at 83-87 mln tonnes, compared with the record 86 mln tonnes in 2017-18.

Ukrainian farmers are reporting improved crop conditions for the record area of winter wheat now in the ground. Officials say almost all crops successfully wintered and that winter losses are close to zero.

Most of Europe’s winter wheat crops have emerged from dormancy more than a month ahead of normal, which may leave them vulnerable to any late winter frosts.

EU (Paris) futures are down just over €4/t on the week, following the global trend and news that coronavirus has spread into Europe.

UK futures prices are down just over £2/t over the same period, although the fall in the pound/dollar rate equates to a $4.50/t reduction. Spot values remain supported by a continued reluctance among farmers to sell amidst limited demand.

UK plantings of both late-sown winter wheat and spring crops continue to be affected by wet weather. The feeling is growing that, in some regions at least, land may remain undrilled this season.

Will Ringrose, ADM Agriculture’s head of oilseeds, comments on the OSR market

Another week of turmoil for world stock and commodity markets this week. Whilst new cases of coronavirus in China seem to be slowing, fears grow over the number of outbreaks that spread into South Korea, Iran, Brazil and Italy over the weekend.

As expected from news of this type, global stock markets, equity markets, and agricultural markets again reacted and traded sharply lower on the uncertainty of what this would mean for the global economy and food demand. The Dow Jones posted its worst day in two years. Crude oil tried to trade higher but ended up extending losses, with benchmark West Texas Intermediate trading close to $48.

In China, the virus seems to be stabilising for now. People are slowly getting back to work. However, the International Monetary Fund estimates zero growth for the Chinese economy in Q1 2020.

Chinese interest in US soybeans may pick up as manufacturing business gets back to some form of normality. It is rumoured that Chinese buyers have requested some March soybean shipments from Brazil to be delayed, although it’s not known how many.

After a reasonably friendly USDA Outlook conference last week, CBOT soybeans struggled to find support this week, with a big Brazilian crop being harvested and lack of Chinese demand.

The USDA outlook conference estimated the US planted area for 2020/21 is set to increase but stocks are expected to tighten due to the phase-one deal, pegged at 320 mln bushels compared with 425 mln/bushels last year.

South American weather is warm and dry for the next few weeks, which will help harvest progress. Higher export taxes for soybeans in Argentina,  together with a weaker peso, will probably mean Argentinian farmers will store more soybeans for longer this season.

The market has seen a sharp setback in vegetable oil prices over the past few weeks and is now looking oversold. However, until coronavirus is stabilised, and the market sees some demand coming forward, then prices are likely to remain pressured.

In Canada the blockades continue, hindering logistics in Western Canada. It’s estimated that there are over 50 vessels now waiting to be loaded, double the usual amount.

European rapeseed prices saw sharp losses at the start of the week, but closed firmer in Wednesday’s session, overcoming the five-day downtrend.

UK farm gate prices were also supported by the weaker sterling/euro rate. In the past few days sterling fell against the euro on the back of delayed budget reports and rumours of a Bank of England rate cut due to coronavirus.