Coronavirus has continued to be the main influence across all markets.
There are some opportunities in the UK for new crop, with certain traders being prepared to pay more than others to secure supplies.
Global wheat ending stocks are slightly lower than expected but still at a record high.
What to watch
Moves by the US Federal Reserve and the Bank of England to cut interest rates to aid their economies have triggered much volatility within currency markets, exacerbating the swings in futures markets.
London May wheat futures closed on Thursday at £149.50 per tonne, a fall of 0.7% week on week.
Paris May wheat futures settled at E177.75 a tonne, down 3.5% week on week.
Paris May rapeseed futures settled at E356.75 a tonne, down 6.6% week on week.
In contrast to European and world markets, UK wheat prices have generally been drifting sideways, buffered from significant downside pressure by the weak sterling-euro exchange rate.
Coronavirus has continued to be the main influence and cereal prices have struggled to resist the falls witnessed in the wider financial and commodity markets.
However, there have been opportunities in various locations, particularly for new crop, with some traders being prepared to pay more than others to secure supplies.
We have seen positive basis levels for some with ex-farm prices £2-3 per tonne above the corresponding wheat futures.
The UK market has done what it needs to do for now to reduce old crop exports, encourage carry over of tonnage, and achieve import parity for new crop.
For now, the fundamentals have taken a back seat in relation to the geo-politics - not least to the dramatic falls in crude oil prices following Opec’s meeting with Russia.
As and when the fundamentals do return to the driving seat, domestic price movements are likely to be determined more by the global supply and demand situation than events closer to home, despite the horrendous situation with the UK’s national crop.
Jeremy Higgs, ODA
Currency volatility and coronavirus increase European grain market uncertainty
Over the past weeks, EU grain markets have been driven mostly by external global issues and events, although last week did see a sharp rise in exports as Russian values dipped.
The spread of coronavirus across much of the EU has weakened the market. The outbreak has sparked fears of a significant impact on demand, potentially undercutting growth prospects within the EU.
The US Federal reserve has already cut interest rates in an attempt to shore up the world’s largest economy. This was followed by a similar move by the Bank of England and the European Central Bank is likely to follow.
This has triggered much volatility within currency markets, exacerbating the swings in futures markets, particularly on the Paris Matif.
In addition, oil prices plunged to multi-year lows after Opec failed to strike a deal with Russia at last week’s meeting to cut output to offset the effects of the coronavirus outbreak.
As a result, Saudi Arabia slashed prices and indicated it would step up production. The rouble declined sharply, which supported Russian export prospects.
This will lead to more aggressively priced Russian shipments to compete directly with EU supplies over the final quarter of the marketing season.
These issues are likely to keep the markets volatile.
When things start to calm down, the length and extent of the coronavirus outbreak is likely to continue to be the main driver.
David Woodland, ADM Agriculture
Hand to mouth trade likely to continue
In the light of a general macro sell-off due to coronavirus, agricultural markets continue to weather the storm relatively well.
Ultimately, most commodities are not a luxury and only traded due to necessity and, as such, logistics and politics can get in the way. But as long as the commodity is not a carrier of the virus the wheels should continue to move forward.
Nonetheless, speculative cash may withdraw from paper markets short term and this ‘risk off’ from paper markets will take time to rebuild, but history shows it does tend to happen.
Meanwhile, the amount of physical trade remains thin – a hand to mouth trade is expected mainly due to lack of clarity around consumption – movement restrictions will slow usage of fuels and the oils price slump will not encourage too much enthusiasm around biofuels, but livestock still need feeding and contracts executing.
South American weather remains in the headlines, with recent rain in Argentina muddying the water around potential crop size after a dry growing season.
Likewise, the farmers strike over export tax increases has not helped the supply chain and, added congestion in Brazilian ports, has actually encouraged some buyers to look in the US for cargos.
The timeline for coronavirus to run its course or to retreat due to medical intervention is currently unsure but the world cannot ignore it and markets will resume, but crops need to get planted, established and harvested and buyers need cash and logistics.
Expect a quiet couple of weeks in the agricultural markets but watch for China’s return.
Cecilia Pryce, Openfield