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Keeping an eye on the grain market - April 8 update

The USDA will be publishing its April World Agricultural Stocks and Demand Estimates report on Friday, which could prove pivotal to the UK market. 

Old crop London wheat futures have fallen to their lowest values since early December 2020 as sterling reached its strongest level against the euro for over a year last week.

Winter wheat crop conditions in the UK are faring relatively well, and the supply and demand situation for next season still hangs in the balance.

Black Sea cash prices have fallen sharply as demand has seemingly disappeared, placing pressure on the EU market and leaving trade longs staring at the slowly eroding old/new crop spread.

World oilseeds prices had another positive week, following the USDA’s Prospective Planting report.


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Nov-21 LIFFE wheat futures closed on Wednesday April 7 at £163.90/tonne, a fall of £0.60/t on the week.

UK: Wheat futures fall as sterling reached strongest level against the euro for over a year 

UK wheat prices have continued to ease following the Easter break. Weaker world markets and a lack of fresh domestic consumer demand have combined to extend the trend of lower prices that has been in place since the beginning of last month and seen UK wheat lose almost 10% of its value.

Old crop London wheat futures have fallen to their lowest values since early December 2020 as sterling reached its strongest level against the euro for over a year last week.

Millers remain absent from the market as they continue to use up their imported supplies. However, some buying of domestic wheat is expected during the next four months before 2021 harvest supplies become available.

Old crop French wheat futures have fallen sharply and lost €11/t since the end of last week, which many traders blame on a lack of demand. However, the EU wheat export pace to date would not support that view.

Wheat shipments from the EU from January to April 4 reached 20.26 million tonnes, which is an increase of 470,000t on the previous week and significantly more than the weekly tonnage needed to exceed analysts’ overall export estimates for the next 12 weeks. This is leading to a relatively tight balance sheet for the EU, with stocks around 1mt down on the year.

The United States Department of Agriculture (USDA) will be publishing its April World Agricultural Stocks and Demand Estimates (WASDE) report on Friday, which could prove pivotal to the UK market.

Simon Ingle, Frontier

Global: Russian wheat crop could be third largest on record 

Global wheat markets are now fully focused on the prospects for next season’s crop.

Although it is only just April and there are a few months left to go for old crop 2020/21, the old crop supply and demand factors are now well known. Looking ahead to next season, outlook is for greater global supplies and increasing confidence.

Starting with the US, and the area of winter wheat is estimated to be up 9%. Although down year on year, the condition of winter wheat in the US has been steadily improving.

Although there are some concerns for Russian winter wheat, a crop size between 75-80mt still remains probable, potentially the third largest on record. Further long-term wheat market bearish news is the increased soil moisture across much of Australia.

The heavy rainfall has replenished soil moisture and with the planting campaign set to begin this month, conditions are also providing market confidence for Australian supply in 2021/22.

In the UK, winter wheat crop conditions are faring relatively well, and the supply and demand situation for next season still hangs in the balance. New crop markets are still pushing up at near import parity levels, with the expectation supply next season will be tight.

However, with currently good crop conditions there is an increasing risk that the UK could have a small surplus next season, and new crop prices risk falling to export parity.

Peter Collier, CRM Agri

European: Improved crop outlook shakes the market 

A significant change in sentiment, mainly linked to an improved outlook for EU and Black Sea crops has shaken the market, with May matif trading just over €30/t lower than its mid-January high.

Additionally, Black Sea cash prices have fallen sharply as demand has seemingly disappeared, placing pressure on the EU market and leaving trade longs staring at the slowly eroding old/new crop spread.

The fall in matif futures now sees wheat trading below corn prices, which will continue to fuel wheat usage for the remainder of this season and well into the new marketing year.

Despite the expected rebound in EU production, higher domestic usage and rumours that China is looking at buying new crop French supplies, this should provide some stability to new crop prices.

However, the main driver for EU pricing will be Russia, and how exporters get round the current tax system. Egypt dipped its toes into new crop yesterday, buying 290,000t of Russian and 55,000t of Ukrainian wheat for early August shipment.

At the tender, over 1.25mt was offered, and although the sale can’t be used to calculate the export tax (more than 60 days in the future) the Russians have thrown down the gauntlet regarding the setting of FOB export values.

That will send trepidation through the EU grain trade, which did not expect Russia to be a major player this harvest, mainly due to the uncertainty of the tax (which is set on the day of custom clearance).

The sale, and the amount offered, certainly disproves that fact.

David Woodland, ADM Agriculture

Oilseeds: USDA release surprisingly bullish soybean plantings report. Markets unconvinced, but rally anyway    

World oilseeds prices had another positive week, with spot soybean export values rising by around $20/t, new crop Chicago soy futures adding 15cents/bushel, while European rapeseed futures slipped marginally.

Underpinning the strength was principally the USDA’s Prospective Plantings report which showed US farmers intend to sow 87.6 million acres of soybeans, up 5% on 2020. With prices at elevated levels, traders had expected a much larger area to be planned.

This surprising news propelled Chicago’s limit higher and most of these gains have been retained in subsequent sessions. With US soybean stocks at precariously low levels, the market will be very sensitive to Midwest sowing and growing conditions over the next few months.

Attention is now turning to Friday’s USDA WASDE report, which could show a rise in US soybean exports and a fall in stocks, to take into account strong recent US sales. However, the April report is not traditionally one in which officials make large changes to their forecasts. Either way, a pick-up in volatility can be anticipated either side of the report.

Closer to home, European rapeseed markets are increasingly focusing on new crop potential, with some analysts starting to revise production forecasts lower, not higher.

Import needs will again be significant and again originated from Canadian, Ukrainian and Australian suppliers.

Rupert Somerscales, ODA

Organic: No significant move to feed barley despite soya market challenges 

The organic market remains quiet. Supplies of domestic wheat are still tight and we have yet to see a significant move towards additional inclusion of barley in feed rations.

It seems strange that feed manufacturers are not seeking to reduce their cereal costs in rations, especially given the challenge in the soya market.

Soya is seeing significant upward price pressure with one importer suggesting that new offers of soya would be more than £950, which is a massive increase due to increased shipping costs.

This highlights to strategic weakness that we see in the organic feed supply chain, which is so reliant upon imports and vulnerable to supply shocks that can easily occur. Who foresaw someone attempting a three-point turn in a narrow waterway?

We have seen some slight renewed interest in malting barley as lockdown comes to an end but how quickly demand picks up is difficult to understand.

We are starting to see some interest in new crop and early indications on organic feed wheat suggest that a value of £240 ex-farm is achievable. With Nov-LIIFE Futures at £163, translating to ex-farm feed wheat values in the mid £150s, these values look in line with expected organic premiums.

Spring drilling has been progressing well and a forecast improvement in temperatures will be welcome to give the spring crops a good start and winter crops a boost.

Soil temperatures to trigger soil biological activity are important at this time of the season and so warm weather and some rain would be most welcome.

Andrew Trump, Organic Arable

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