Farming News - Wheat & OSR market update from ADM

Wheat & OSR market update from ADM

08 Jan 2021
Frontdesk / Arable / Finance

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

Grain prices have moved considerably higher since our last report, with the US market up $18/t, Matif up €10/t, and London up just over £10/t on March 21 positions.

Talk of diminishing export availability in the Black Sea has supported the recent rally, along with continued buying interest from China and concerns over South American corn and soybean production due to dryness. Trade talk suggests reduced South American output could push additional export demand into the US.

Argentina will suspend sales of corn for exports until 28 February. The surprising move is part of the government’s effort to ensure ample domestic food supplies.

Russian agency SovEcon has downgraded its estimate for Russia’s 2020/21 wheat exports to 36.3mln t, from 40.8mln t previously, due to an upcoming export tax aimed at stabilising domestic food prices.

Conversely, Ukraine’s trade union has reported government assurances that no additional grain export limits will be imposed for the 2020/21 season.

Egypt’s supply minister reports the country has strategic wheat reserves sufficient for 5.5 months. However, Morocco has extended its suspension of import duties on soft wheat until 31 May to ensure regular supply amid low domestic output.

DEFRA has released an update on its 2020 UK crop estimates, pegging wheat production at 9.658mln t. This 40% year-on-year reduction is due to a 24% drop in area (1.387mln ha) and an average yield of just below 7t/ha.

The announcement of the trade deal agreed prior to the UK’s departure from the EU at the end of 2020 at least clarifies the UK/EU trade relationship regarding movement of goods between the two parties.

With no tariffs or quotas to be applied, grain imports and exports can continue freely. This is seen as a positive move for the UK, given its increasing dependency on imports for this season due to the lower crop forecast. There have been, and will be, hiccups but in practice imports and exports should continue.

In addition, the above agreement will also aid UK growers looking to market their 2021 wheat crop. The expected rebound in production will return the UK to being a net exporter, but tariff-free exports to the EU will avoid the need for the UK to chase Third country trade, which would have affected farm prices

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

It’s been an interesting start to the new year with CBOT soybeans making new highs in every session. Prices shot though the $13 target at the end of 2020, to trade over $13.50 in the first few days following the Christmas break.

South American weather again sparked off fund buying. A lack of rain in Argentina persists and, while parts of Brazil will get some showers, the long-range forecast is dry and for above-normal temperatures. La Nina is expected to continue into the new year and will be closely watched.

Next week USDA will release its January report. It’s expected that South American production will be reduced and private forecasters are now amending their estimates. The US agricultural attaché and Informa both estimate the Argentinian crop at 50mln t (down from 51.5mln t in December), the same as USDA in December. Informa also reduced its Brazilian estimate to 131.5mln t.

Despite the sharp rally, the only available supply of soybeans is out of the US. Price appreciation should ration demand but, given the rumours circulating on Wednesday of China purchasing a further two or three cargoes of US soybeans, that hasn’t happened yet. China is still striving for better food security and stockpiling will continue.

Veg oil markets also continue to make new contract highs. Palm oil hit 10-year highs at the start of the week and Malaysian palm oil did the same on Wednesday. Concerns remain over lower production, with stocks in Malaysia estimated to be at a 13-year low. Demand also remains firm despite renewed Covid19 cases and lockdowns.

Matif rapeseed started the year by trading at contract highs and has continued to do so for the past four sessions. Canadian canola also traded higher for the sixth straight session midweek.

UK rapeseed prices hit season highs. Investors turned attentions from the EU/UK trade deal and focused on escalating Covid 19 cases and renewed lockdowns. Sterling fell back from recent highs against the euro, which lent support to UK prices.