Farming News - Wheat & OSR market update from ADM

Wheat & OSR market update from ADM

24 Jun 2022
Frontdesk / Arable / Finance

Jonathan Lane comments on the wheat markets

Another choppy week on the markets as the ever-present topics of weather and geopolitics play out, with all benchmark wheat futures losing ground.

The rapid pace of the US winter wheat harvest has helped ease markets on a fundamental level. About 25% of the area has been cut, around 10% ahead of last year, as the dry weather allows the southern states to make cracking progress.

CBOT wheat opened Thursday sharply down on overnight trade, as it had the previous day, as the wheat market steadily starts to feel heavier. Week on week, the main wheat markets have moved as follows:

Dec22 CBOT wheat is down $28.49/t

Dec22 MATIF wheat is down €23.75/t

Nov22 ICE London wheat is down £17.30/t

Reports that the Russian wheat harvest is underway are adding further pressure, along with SovEcon raising its production estimates again, by 1 mln t to 89.6mmt. This additional tonnage will go straight on to the country’s exportable surplus, pushing potential shipments towards 43 mln t, with some analysts calling for a number closer to 45 mln t.

Talks continue between Russia and Turkey about setting up a humanitarian export corridor to move grain out of Ukrainian ports. However, reports of steadily increasing levels of infrastructure damage are raising questions about the feasibility of these corridors, even if all the other hurdles can be passed. On Wednesday, both Bunge and Viterra’s terminals in Mykolaiv were hit in the latest round of Russian attacks on the port city, with both companies confirming there had been damage.

The French wheat harvest has begun, with early reports suggesting bushel weights in the region of 74kg/hl. However, moistures are reportedly low and we have heard of silo intakes in the south and west in excess of 78kg/hl. The Paris Basin area is expected to perform even better once harvest arrives there in the coming days.

There is some concern around forecasted rain across some of the areas that are currently cutting and the associated effect on quality, as the rain will probably stop play for a couple of days.

The UK old crop market is now essentially done. Consumers are again notable by their absence, whilst the last remaining loads of old crop come to market in a desperate bid to find an outlet as the industry empty sheds ahead of harvest.

The weakness playing out in the new crop market sees the Nov22 ICE London feed wheat contract heading towards the key technical level of £283/t. If this level cannot hold, we could well see values continue to decline, with the next stop around £270/t. 

Will Ringrose comments on the OSR market

CBOT soybeans are trading sharply lower this week. US farmers are reported to be 94% planted now on soybeans, with an estimated 5.45 mln acres to go. Crop ratings have fallen two points from 70% good/excellent to 68%.

At the end of the month the USDA will estimate the US soybean area as of 1 June. Some forecasts are calling for the area to be up 1 mln acres on USDA’s March figure.

The US weather story is now looking less concerning. The forecast for the next five to six days shows cooler temperatures and scattered showers, which is eroding the recently built-in weather premium. However, longer term forecasts show it getting hot/dry again.

In China, the effects of COVID-19 are still affecting the economy and lockdowns continue.

Energy markets have declined. Oil prices traded a five-week low, but bounced from session lows. The bearish situation in China, added to higher exports out of Iran over the past few weeks, has weighed on prices.

Veg oils just followed everything else for the ride. Palm oil tried to bounce, but then closed 470 ringgit (9.44%) lower again midweek. Bean oil closed sharply lower and rapeseed followed. Supplies seem to be outweighing demand and following energy markets lower.

Canadian canola prices closed over $50 down on the July on Wednesday. Matif rapeseed traded down to levels not seen since the start of April. EU harvest has started and seed availability looks comfortable for now.

Demand for products is slipping and there is nothing new to support prices whilst everything else in the complex trades lower. EU harvest has started and the threat of biofuel mandate changes is pressuring prices.