An eye on the grain market - December 21 update

The focus in European grain markets is turning to Friday’s meeting between the Russian government and exporters. With the fast pace and high volume of exports from Russia so far this year, any decisions in this meeting could affect prices in Europe.

As we enter into the winter period, crop conditions will be closely monitored. Russian and Ukrainian crops are in good condition but Romania, in particular, has had a very dry autumn.

Analyst, Strategie Grains, reported that EU wheat production is expected to jump 16 per cent to 147 million tonnes following the recent rain across most regions which has significantly helped the autumn drilled crops.

Andrew Hill, Frontier

World wheat markets showed more than a hint of the festive spirit last week, with gains noted across most of the world’s key markets. Russian milling wheat export prices jumped $6/t, while its domestic feed wheat and flour prices also rallied.

In turn, Egypt purchased supplies at the highest average price all season, some $5 above its previous purchase price. In Europe, French wheat futures added €3/t, UK domestic values £3/t and German A grade €7/t.

In the Americas, US SRW wheat futures added $7 and Argentina’s numbers are currently trading around $10 higher. Prior to these gains, on paper, US, French, Ukraine and Argentina could all have posted offers to Egypt within $3 of each other.

While tightening supply and demand global fundamentals are clearly the root cause underpinning values, adverse winter growing conditions across eastern Europe and reports that the Russian government is set to meet its exporters again on Friday, with a view to slowing exports further, are helping to maintain the immediate bullish sentiment.

For maize, Ukrainian prices rose by €1/t last week, but remain over €15/t cheaper than equivalent French supplies delivered to Rotterdam.

Unsurprisingly, Ukrainian maize continues to flood into the EU, dampening demand for EU-origin wheat into the animal feed industry.

Rupert Somerscales, ODA

Soybeans have firmed during recent weeks. Positive vibes emanating from the Trump/Xi Jinping meeting have resulted in China stepping up purchases of US beans, although recent reported trades still place annual sales well below normal levels.

Chinese crush margins, albeit slightly higher on the week, continue to reflect losses as the country struggles with lower feed demand and abundant supplies of beans.

This, plus the continued efforts of the Chinese authorities to source other alternatives to US beans, remain as negative factors.

South American premiums have risen. Weather concerns and firmer export prices did little to encourage any selling reaction from Argentine farmers, although selling remains brisk in Brazil, where analysts put the crop close to 122mt.

MATIF rapeseed closed lower, although well off the lows. Firming CBOT values and a fresh 18-month low in the value of the Can$ halted recent declines in Canadian canola.

Asian markets have all traded higher in recent sessions, supported by the Malaysian palm oil market, which hit an eight-week high, despite the recent demise in crude and energy markets.

In summary, while the threat of increased tariffs being imposed remains, further Chinese buying interest should keep the market underpinned.

David Woodland, Gleadell