Farming News - Wheat and OSR Market update from ADM

Wheat and OSR Market update from ADM

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

In a roller-coaster week markets have managed to recover some of the losses following the sell-off into last weekend, but are still trading down overall.

Wheat market fundamentals remain unchanged. Russia’s government has approved the higher €50/t export tax on wheat from 1 March in a further attempt to curb rising domestic prices, which is expected to constrict the availability of wheat onto the global markets.

The country’s government has also approved an export tax on corn and barley of €25/t and €10/t respectively, starting 15 March and running through until 30 June.

Although markets remain very nervous after the recent sell off, it remains hard to find a reason why cash values should decline from current levels. There is limited volume available from the Ukraine, Australian elevators are booked solid for the next few months and EU exports need to slow while UK imports need to rise.

Soft wheat exports from the EU had reached 14.5mln t as of 24 January, down from 17.1mln t cleared by the same week last season. However, the tonnage remains too high in context to the EU balance sheet. 

The need to slow exports remains a tough proposition, as demand is expected to continue from North Africa and the Middle East countries while Russia is trying to price itself out of the market.

Unless that demand switches to other origins such as Argentina, Australia, or the US, the EU market could move higher to try to choke overseas trade.

Australian wheat prices offered to Asian destinations have climbed to a seasonal high on expectations of lower supplies from the Black Sea region.

Further bullish news continues to emerge elsewhere. Condition ratings for US winter wheat declined during January in many key hard red winter wheat states (Kansas, Colorado, Nebraska and South Dakota), although they did improved in Montana and several soft red winter states.

Despite warnings that authorities might block wheat from Australia amid escalating tensions, exports to China surged last month to 600,000t, with a further 110,000t being shipped in January.

Return of rain in Brazil is disrupting the soybean harvest and slowing down fieldwork, potentially delaying sowing of the country’s second corn crop.

Rains in Argentina have improved prospects for recently sown crops, but worries about potential crop yields persisted ahead of February, usually one of the driest months of the year.

Grain crops in the EU have mostly acquired greater frost resistance during the cold spell since December, but an unusually mild winter in the south east of the bloc has limited plant sturdiness.

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

US soybean markets have recovered following a sharp fund sell-off last Friday. After being 60 cents down, prices have recovered to within touching distance of $14/bushel once again.

In South America showers are continuing this week into the weekend, although it’s worth noting that the La Nina weather system has not gone away and dryness is expected to return from next week.

Crop conditions in Argentina are improving. Farmer selling remains slow, but crop estimates seem to have stabilised. The Brazilian harvest is less than 2% complete with vessel line-ups increasing. It seems harvest will be delayed until mid to late February, which would force buyers to switch back to US soybeans.

Chinese buying interest has not stopped. Due to South American supply issues, the country has returned to the US market this week buying several more cargoes. The Chinese new year, which starts on 12 February, will slow buying activity. 

Veg oil markets recovered from last week’s sell-off. Asian oil markets all closed firmer, with Malaysian palm up 3% ahead of yesterday’s national holiday.

Canadian canola reached 13-year highs this week, trading over $710/t.

Matif rapeseed also traded back at contract highs this week after a sharp sell-off in recent weeks, with May futures touching €437/t.

UK prices bounced back to season highs, despite prices being slightly pressured by the firmer pound which reached 1.13 this week.