Farming News - Wheat and OSR Market Update from ADM
Wheat and OSR Market Update from ADM
Jonathan Lane, ADM Agriculture’s head of grain trading, comments on the wheat market
This week’s USDA report made little difference to global wheat numbers, although bullish corn and soybean reports provided support to the US wheat complex before the market gave the gains back.
The global wheat market is becoming even more complex as the trade dispute between China and Australia is seen potentially disrupting global trade flow.
While world markets may weaken, the tighter EU and UK balance sheets should keep domestic prices underpinned. But growing optimism over a Brexit deal should offer support to sterling, providing resistance to higher UK prices.
In more detail, US wheat prices have ended about $3/t lower on the week. USDA’s report on Tuesday reduced US maize yields and ending stocks for the 2020/21 marketing season. The cuts exceeded trade expectations. However, wheat numbers were virtually unchanged.
The price of Australian wheat offered into Asia fell this week, undercutting Black Sea supplies for the first time in at least four years as the country prepares to harvest a near-record crop.
Ukraine has exported 17.1mln t of grain so far this season, down 14.5% on the year, mainly due to lower maize exports. Wheat exports are reported at 10.9mln t.
Market researcher SovEcon puts Russian exports of wheat, barley and maize during October at 4.95mln t, down from 5.66mln t shipped in September.
Russia’s grain export quota is seen at 15mln t for the period Feb 15-Jun 30 2021, which was higher than expected. That suggests more optimism over the country’s 2021 harvest prospects.
Egypt’s state buyer GASC purchased 300,000t of Russian wheat in its latest international tender.
Soft wheat exports from the EU and Britain reached 7.84mln t as of 8 November, down 24% from the volume cleared by 10 November last year.
In its monthly update, Strategie Grains reduced the EU soft wheat crop to 129.3mln t and cut its projection of maize output to 62.3mln t.
UK prices are £2-£2.50/t higher on the week, despite a sharp increase in sterling as optimism over a Brexit EU trade deal increases.
Looking at future production, French farmers had sown 76% of the expected soft wheat area for next year’s harvest as of 2 November, compared with 66% last week and 63% last year.
Agribusiness consultant APK Inform reports that most of Ukraine’s winter grain crops are in good/satisfactory condition. Official figures show that 92% (5.65mln ha) of the intended area had been sown.
Will Ringrose, ADM Agriculture’s head of oilseeds, comments on the OSR market
News of the Pfizer vaccine that could potentially be available later this year saw outside markets including crude oil prices and stocks close higher on the week.
The US soybean harvest is reported to be 92% complete against a five-year average of 90%.
With the US election out of the way, attentions turned to the November USDA report and the potential changes made to the supply and demand sheet. Whilst the US harvested area of soybeans remained unchanged, this season’s yields were reported at 50.7 bushels/acre, below trade expectations of 51.7 bushels/acre.
This in turn pulled production and US 2020/21 ending stocks lower. World ending stocks for 2019/20 actually came out higher than expected (95.3mln t vs 93.1mln t), but 20/21 endings stocks were lower than expected (86.5mln t vs 87.6mln t). This would put world stocks-to-use ratios at the lowest for 23 years.
South American weather remains a concern. Although the forecast shows light rain in southern parts on Brazil and Argentina over the weekend, there is little to no rain forecast for the next few weeks. The ongoing La Nina event isn’t expected to peak until January. Brazil’s plantings are estimated at 54% complete vs an average of 52%, but some will have to be replanted at some point.
BAGE reduced its soybean crop estimates for Argentina to 46.5mln t vs 49.5 mln t. It is estimated that 4% of the Argentinian crop has been planted vs 9% last year (13% average).
This overall bullish sentiment supported soybean prices and levels have continued to break contract highs.
US soybean sales have slowed. The USDA announced a sale of 123,000mt of US soybeans to an unknown for 20/21 delivery. But there is no action from China, which has been absent from the market since 15 October.
Meanwhile, veg oil prices continue to make new contract highs, with Malaysian palm oil hitting 8½ year highs.
Matif rapeseed made new highs after the USDA report before tracking sideways yesterday. Prices have ranged from €381.25 to the dizzy heights of €411.50 in a short space of time.
In the UK, prices have tracked EU levels higher, although they have been pressured slightly by sterling’s rally against the euro.