The Vivergo Fuels plant closure continues to put pressure on the UK wheat market.
Rainfall in Brazil has boosted soybean production, helping to level out a fall in US exports.
And Pacific surface water temperatures hit their lowest since 2012, provoking ideas of a La Nina weather pattern.
What to watch
Sterling is set to remain a major catalyst for UK wheat prices in 2018.
London May 2018 wheat futures closed on Thursday, December 7, at £142.60 a tonne, a rise of £0.35 a tonne on the week.
UK wheat continues to drift lower
London feed wheat posted a second consecutive month of losses in November in the wake of ample global stocks and the unexpected Vivergo news which will lead to lower domestic consumption from the ethanol industry in 2018.
Vivergo Fuels has reiterated through a press release published on December 4 that due to “government inaction” to support the UK biofuel programmes, profit margins have remained under continuous pressure.
As such, the 420m-litre ethanol plant [aimed to use 1m tonnes of mostly East Yorkshire wheat] run by Associated British Food and DuPont had no choice but to shut down.
Consequently, the UK wheat supply and demand balance could be less tight than previously expected, particularly at a time when the UK remains a net importer of wheat.
However, regarding the quality of the crop, the final results from the AHDB Cereal Quality Survey showed that just 24% of the nabim wheat Group 1 met the quality spec due to the reduced Hagberg following a wet August.
Looking ahead in 2018, the UK wheat planted area could shrink for a fourth consecutive campaign to 1.752m hectares, according to the AHDB’s Early Bird Survey, while the spring barley area could continue to expand and the rapeseed area could snap a five-year decline by jumping 9% or more than 60,000 hectares.
Undoubtedly, sterling will remain a major catalyst for UK prices in 2018.
Benjamin Bodart, CRM AgriCommodities
European markets at a standstill
European markets are still struggling to identify the next move.
The concern over exports, or “lack of them”, cannot be overlooked, but reality is that export logistic capacity is available if buyers want what the European Union has - but it comes at a price.
Domestic market values throughout many member states are not encouraging traders to discount currently hard to buy physical stocks, to ports and ships.
This may change later in the new year, but it relies on farmers selling and a better confidence over the state of winter plantings, which do not currently look good in some countries.
If you couple this with ongoing dry conditions in the Iberian peninsula it highlights the trades caution as we enter the holiday period.
Of interest will also be the latest maize import levy calculation, with the move to the March Chicago contract, which may also refocus consumers’ attention, along with the commission’s increased EU maize crop and January’s opening of the new tariff rate quota season.
Cecilia Pryce, Openfield
Australia – rainfall impacts wheat harvest
Some production concerns are emerging in Australia, where wheat yields are good in the west, but very poor in the east.
Some deterioration in quality is possible in the south east. Rainfall has brought the harvests to a halt in Victoria and New South Wales, states where a significant area of wheat is still to be harvested.
For Russia - winter is settling in but temperatures are still higher than normal for the season, thus far limiting the impact upon logistics.
Regarding Argentina’s maize-producing region - market operators are concerned about the weather, with dry conditions prevailing and drilling yet to be completed.
Soybean prices have been on an upward trend on the Chicago market this week, breaching the $10-a-bushel technical resistance level on nearby expiries.
Weather conditions remain favourable in Brazil, with sufficient levels of rainfall.
The situation is less encouraging in Argentina with an increasingly severe water deficit.
Falls in US exports are offset by Brazilian exports – showing an increase of 25% to 61m tonnes for March-November.
Gary Philips, ODA