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

Last week’s USDA report didn’t bring any exciting news for the wheat market as there was nothing particularly contentious and the trade took the revision in its stride.

The key changes for wheat saw higher crop estimates for Russia, Australia, Canada and China and reductions in India and the EU.  Whilst the wheat changes were largely benign, changes to the corn numbers were a bit more dramatic, with sharp reductions forecast for EU and US output.

The recent extreme heat and drought has affected EU corn production and this is creating concern that higher wheat demand will result. Increases in wheat feeding usage and higher wheat inclusion by ethanol manufacturers could put pressure on an already-tight European wheat balance sheet.

Despite the potential for higher wheat demand the market has fallen in sharply in the past week and is now testing the bottom of the eight-week trading range. Talk of higher Russian exports, increasing Ukrainian exports and a backdrop of global recession are all having an impact.

It would seem that the trade is trying to take advantage of the freeing-up of grain movements from Ukraine, with traders trying to switch out of North West Europe origination back into the cheaper Black Sea.

The UK harvest is nearly complete – some 10 days earlier than normal. Yields on some of the later crops, particularly those from good, bodied land have been surprisingly good and we wouldn’t be surprised to see a UK wheat crop of between 15.5-16mln t, perhaps a little bigger than we had initially thought. However, even with these bigger crops the UK remains uncompetitive for export and with Denmark back in the market we are struggling to compete.

UK wheat quality is generally very good, aside from protein variability. Results to date would suggest that proteins on milling wheat are between 0.7 and 1% lower than last year and this is keeping a bid under the Group 1 premiums. However, with more crops finding their way onto lower grades or the feed wheat heap we are seeing a widening in domestic quality premiums.  

The short-term trend in the market has been lower, but from a production perspective the EU balance sheets for corn and wheat could suggest a medium-term bullish bias. However, the market has still failed to break out of the £255/£275 range on Nov22 ICE London wheat, so for now we continue to trend sideways.

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

The US soybean market has come down with a bump over the past week with concerns about the wider economic slowdown and lower crude oil prices creating a more negative backdrop to the market.

Last Friday’s USDA report gave the market a bearish surprise, adding to the negative sentiment. The USDA numbers predicted a bigger 2021/22 ending stock figure on the back of lower US exports and they also raised the yield forecast for the upcoming US crop.

With crude oil prices drifting lower and the negative sentiment from the soy complex, the old crop rapeseed market is also coming under pressure with May23 Matif down circa €50 on the week.

The focus for the European rapeseed market is what happens with plantings and potential production for 2023. The recent drought conditions have not been conducive to rapeseed drilling and establishment, and we have been concerned that there could be a drop in crop size for 2023. But recent rains, with some more in the five-day forecast, may improve the situation. It is something we need to watch very closely.

In the short term the European and UK rapeseed market looks like it will struggle to get back to the highs unless we see a significant uplift in product demand.