In the UK, London wheat prices showed gains this week on the back of global trends.
EU grain prices have firmed from the contract lows seen in early September.
And there has been a muted reaction to the latest US Department of Agriculture Wasde report on world markets.
What to watch
Oilseed markets are focused on China following its recent purchase of US soybeans.
London November wheat futures closed on Thursday at £136.00 per tonne, a rise of 1.5% week on week.
Liffe futures rise to highest level since August
This week, London wheat futures rose to their highest level since August 22.
Gains were not specifically UK-orientated, rather underpinned by strength from offshore grain markets and despite a stronger sterling.
The weekend attacks on Saudi’s oil processing facility caused a vicious rally across global energy markets and, with a substantial proportion of the world’s grain and oilseeds supplies heading to the industrial, green energy sector, grain and oilseed prices across the globe rallied in sympathy.
We were not immune.
European grain brokers report that they have already bought more than 1m tonnes wheat from the UK in the pre-November period.
While substantial, this should not be such a surprise, since our wheat has been trading at a massive discount to Continental European prices for much of the post-harvest period.
As of Wednesday, the spread between UK and Continental wheat futures was around £17 per tonne, from over £22 per tonne for parts of August and early September.
On paper, the UK wheat balance sheet suggests around 2m tonnes wheat exports will be needed and with the exports already reported, around half the UK’s exportable surplus has already been booked, leaving a far less daunting export programme in place for the remaining months of the season.
As such, and referring to historical data, one would expect this UK/European Union spread to narrow in the coming weeks and months as domestic supplies tighten.
However, while history can give indications about where our domestic wheat prices “should” sit, Brexit’s tariff uncertainty with the EU after October has to be factored-in.
Rupert Somerscales, ODA
EU grain prices edge up
Markets have firmed from the contract lows witnessed in early September, supported by a rise in global prices and short covering.
The continued pace of exports from the EU is also underpinning the market. These were reported last Sunday at 5.1m tonnes, up 34% on the year.
Romania leads the pack, at 1.72m tonnes, followed by France at 1.26m tonnes. Germany, Poland, Bulgaria and the Baltic states make up the majority of the balance.
Algeria remains the main destination, with just over 900,000 tonnes shipped, followed by Saudi Arabia at just under 800,000 tonnes and Egypt at 472,000 tonnes. Korea and Sudan complete the top five destinations.
Black Sea exports are a mixed bag.
Russian exports, have been involved in recent Egyptian tenders but are behind the same point last season.
Ukrainian exports are seen running ahead, supported by a proposal from Ukraine’s agriculture ministry to increase 2019-20 exports.
With EU crop yields apparently increasing, the pace of exports will be pivotal on the future direction of grain prices, particularly as EU domestic usage is projected to rise year on year and remains under threat from cheap imported maize, with 4.5m tonnes imported so far this season.
David Woodland, ADM Agriculture
Focus on US/China
News this week has been largely focused on China and its recent purchase of US soybeans.
It has been at least three months since such purchases have happened, with China living off imported Brazilian beans.
Brazil has been a key exporter in the last few months, being price competitive and China’s only real choice while it refrained from trading with the US.
Last week’s reported sales have been followed by more reports and this week’s US export sales will be watched closely.
The debate over US crop size and the impact of African swine fever on Chinese demand will remain a focus, but as much as many are looking at pigs, maybe the focus should be on chicken demand for soy.
The global supply of soya is now expected to be close to 20.6m tonnes less than last year, leaving stocks 13m tonnes less.
The EU continues to import rapeseed at a great rate, trying to fill the demand left by a short EU crop and many will be keeping a close eye on Australian crop conditions as well, but while the ships arrive domestic markets will find it difficult to rally higher.
The price spread between soybeans and rapeseed has come off its highs from last week but markets remain nervous while waiting for the US harvest to prove or disprove the anticipated crop size.
Cecilia Pryce, Openfield