Farming News - Wheat & OSR market update from ADM

Wheat & OSR market update from ADM

12 Feb 2021
Frontdesk / Arable / Finance

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

Markets went into sell mode this week after USDA released a less bullish report for US corn than had been expected.

As long holders bailed out, the sell-off dragged wheat prices lower, despite USDA’s forecast for reduced global stocks. US wheat markets traded down $5/t on the week.

Bullish sentiment surrounding global corn and soybeans had been driving the markets higher, with the former having reached a 7.5-year high. Although that underlying sentiment remains, many are now questioning whether the US will actually achieve revised export projections.

The report didn’t produce any more tonnage for the wheat complex. USDA left US wheat stocks unchanged and reduced global stocks by nearly 10mln t. However, this figure related mainly to China and India and was deemed unimportant, as these stockpiles never reappear on global markets.

Looking forward, EU exports continue at an unsustainable pace and Russian and Argentine exports remain political. The future will be all about Australia, Canada and the US, which is becoming more competitively priced.

The market this week wasn’t about the lemmings having jumped, it was more that the cliff they were on just gave way! The trade now has to determine whether this was a major market reversal or a market just taking a huge pause for breath.

More bullish news from Australia, which has resumed wheat sales to China in recent weeks, despite ongoing trade tensions between the countries.

Stats Canada estimated all-wheat stocks as of 31 December at 24.8mln t, with 21mln t still left on farm. This was down from 25.8mln t on the year and was below expectation.

Russia’s government has approved a formula-based export tax system for wheat, corn and barley which will come into force on 2 June, a month earlier than envisaged.

Ukrainian export prices have fallen over the past week, mostly due to a jump in Russian exports ahead of the forthcoming export tax.

EU soft wheat exports beyond the bloc reached 15.8mln t on 7 February, down from the 18.8mln t cleared by the same week last season.

FranceAgriMer raised its 2020/21 forecast of French exports to non-EU countries for the second consecutive month to 7.45mln t, although lower intra-EU demand and increased crop availability allowed ending stocks to remain stable at 2.5mln t.

On a negative note, Argentina’s president has pledged that his government will not raise grain export duties or implement grain export quotas following talk with trade representatives.

Looking ahead, France has raised its current winter wheat area to 4.86mln t, which would be 15% higher than the weather-reduced 2020 acreage.

UK old-crop futures have fallen £3/t on the week, although firming delivery premiums have helped protect physical prices from the full decline.

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

Another volatile week for CBOT soybeans which closed nearly 50 cents down after the USDA report on Tuesday.

Broadly the report fell pretty much in line with trade expectations but didn’t give the bulls anything new. World ending stocks were lower at 83.4mln t compared with 84.31mln t in the last report, while soybean production remains unchanged at 48mln t and 133mln t for Argentina and Brazil respectively. This was enough for funds to begin liquidating their long positions.  

South American weather remains largely unchanged, with some rain for the northern and central parts of Brazil, but dry for south Brazil and Argentina until March. In Brazil harvest remains the slowest for 10 years and vessel line-ups continue to grow. Weather and crop developments will be closely watched.

Mineral oil prices firmed close to $60 a barrel which lent support to the complex. At the start of the week veg oil prices rallied to recent highs, soy oil in particular which reached seven-year highs, but post-USDA markets eased slightly.

In Canada, Stats Can estimated Canadian canola stocks as of 31 December at 12.1mln t, down from 15.9mln t last year (-23.7%), although this wasn’t enough to push prices back to contract highs.

Matif rapeseed made new contract highs again pre-USDA, but have since traded lower following US markets. Fundamentally, supply still looks tight for the remainder of the season and rapeseed remains competitive within the complex.

UK prices remain just shy of contract highs with sterling firming in recent days to trade over 1.1400.

shy of contract highs with sterling firming in recent days to trade over 1.1400.