Uncertainty across the UK wheat market as consumers weigh up whether to import.
US wheat prices have been driven upwards on the back of a tighter maize balance sheet.
And UK oilseed prices have risen as sterling weakens.
What to watch
The pound continues to react to the latest Brexit news.
Small crop and trade deals create uncertainty
With very little in the way of harvesting days over the last two weeks, it was good to see the odd combine moving again.
Initial later harvested grains don’t seem to have suffered too much in the way of quality downgrades, but yield remains disappointing for most.
Consumers are now faced with much uncertainty – do they believe in a very small crop and import, or in a crop that may just cover most of our needs if ‘others’ import? Whichever way you look at it, doing nothing is not an option.
Livestock need feeding and bread needs making.
Prices continue to reflect a relative shortage of spot grains due to the smaller crop, but farmers need to think hard about current values and where they could go from here.
The weakness of sterling has helped support prices and pushed prices to values last seen in May.
The wake-up call remains the inverse to the 2020-21 crop in anticipation of returning to a more normal crop size and hence the export values.
If you add this to the trade deal uncertainty surrounding January 1 - the end of the transition period for the UK’s exit from the EU - it makes for a very difficult market and one that needs the utmost monitoring if you plan to postpone your marketing for a while longer.
Cecilia Pryce, Openfield
US wheat values benefit as maize firms
China’s influence on commodity markets is increasing as reports that the country will have to step up its purchase of US soybeans and maize underpin prices.
In addition, USDA is expected to cut US maize production and increase exports in this week’s release, resulting in a much tighter US balance sheet.
Market shorts have been trimming their exposure, triggering a near 15% gain in US maize prices since the recent low set in early August.
As maize competes directly with wheat in the US food, feed and industrial sectors, wheat values have benefited from these firmer corn prices.
However, the rise in wheat prices means US exports have become increasingly uncompetitive.
That said, wheat exports are running 6.4% ahead year-on-year, mainly due to increased sales to China. In a market described as over purchased, the pace defies all logic.
Talk of higher Canadian, Russian, and now Australian crops, together with increased export availability, is seen as a long term negative to US prices. However, signs of recent hikes in Russian prices, due to farmer retention in the wake of a heavy export programme, continues to offer support.
All eyes are focused on Friday’s USDA report. Any surprises may fuel the trade’s appetite to trim maize exposure, which could provide further support for wheat, however bearish the global wheat numbers may look.
David Woodland, ADM Agriculture
Corn downgrade worries fade, winter drilling concerns rise
Unlike in the UK, where local wheat prices stormed ahead, grain prices in Continental Europe were only marginally changed this last week.
This, despite the euro retracing some of its recent upwards pulse against the dollar.
European grain markets appear to have completed their repositioning higher, for now, to take into account the recent EU-Black Sea and US corn crop downgrades (and the lift in Chinese-US purchases) and this has been reflected in last week’s grain price moves, which have barely budged.
However, as we head into the 2021-22 winter plantings season, concerns are surfacing about moisture deficits in the Black Sea region, as well as in France and Northern Europe.
There is very little rainfall in the 14-day forecast to appease these concerns.
Having just come off the back of a difficult weather season, EU markets will likely be more alert and sensitive to 2021-22 prospects.
Until drilling difficulties are confirmed though, the fundamentals remain largely unchanged.
We are facing an amply supplied grain situation across the Black Sea region.
Russian wheat production is now seen over 81m tonnes, with exports at their second highest ever.
Similarly, Ukraine’s maize exports are put at a record 32m tonnes.
This is a lot of grain, especially when the demand side of the equation is in doubt again, as COVID cases spike again on the Continent.
Rupert Somerscales, ODA
Currency drives domestic market
Paris rapeseed futures have continued to trade in a narrow range between E380-385 per tonne since the start of June as expected supply balances a reduced demand.
At 15.57m tonnes, EU-27 rapeseed production has been forecast up marginally since the July European Commission estimate, with 200,000 tonnes in additional supply from 2019-20.
The commission is forecasting total rapeseed use at 20.189m tonnes, down from 22.038m tonnes in 2019-20, with a 2m-tonne reduction in consumption. Rapeseed oil consumption was forecast down 700,000 tonnes to 8.3m tonnes.
Currency is playing a key role in driving the domestic price of rapeseed currently. With the concern around Brexit and weakening sterling, values for delivered rapeseed in pound terms are very attractive.
The combination of marginal year-on-year increase in production and decline in demand require an on-paper 4.5m tonnes of rapeseed imports in 2020-21, 1.7m tonnes less than in 2019-20, more than offsetting the reduced Ukrainian production. Meanwhile, Australian canola production has been revised up.
Rapeseed plantings are progressing well in the UK, with the recent settled period of weather allowing growers to push on with drilling in good conditions.
There will be a reduction in the rapeseed area planted, but not on the scale that was once expected.
Fred South, CRM AgriCommodities