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Keeping an eye on the grain market - December 10 update

Increased production estimates for Australia and Canadian wheat have eased the global on-paper supply estimates.

Russian wheat crop potential for 2021 remains a focus area, with one analyst highlighting the possibility of a crop as low as 72.5 million tonnes.

 

Sterling firmed ahead of the Prime Minister’s meeting in Brussels but has fallen nearly 1 cent this morning (December 10) on the failure to progress with a deal.


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Defra estimates lowest wheat production figure in 40 yearsDefra estimates lowest wheat production figure in 40 years

What to watch

 

There is still little clarity as to what the trading relationship with Europe might be for the UK in only a matter of weeks.

Nov-21 LIFFE wheat futures closed on Wednesday, December 9 at £157.85/tonne, a fall of £0.30/t on the week.

UK: Imports slow due to price changes, while barley exports remain the focus

UK: Imports slow due to price changes, while barley exports remain the focus

UK grain markets remain relatively unexciting on the back of still no news regarding how things will look for trade come January 1, 2021. Nobody seems to be in a rush to cover any positions and if anything, traders are positioning themselves well in advance, to make sure tonnes get to destinations over the holiday period.

 

The ports are reasonably busy, but imports seemed to have slowed probably due to price changes and also the amount of stock already in situ in case the start of 2021 proves to create unforeseen logistic headaches.

 

Exports of barley seem to be the focus for many which is hardly surprising considering the value compared to any other ‘cereal’ substitution, either domestically or in mainland Europe.

 

UK domestic usage data for October was published last week – this did not cause too many shocks for anyone who has been following consumers trends, but still does not predict the future or the size of the carry in and crop numbers.

 

It’s going to be a difficult season to navigate, but at least there are more winter acres planted than this time last year, allowing for some new crop trading opportunities.

 

Cecilia Pryce, Openfield

Global: Easing of global supply estimates increases export market competition

Global: Easing of global supply estimates increases export market competition

Global grain markets have continued to drift, with Chicago wheat prices having fallen back to levels recorded at the start of October, weighing on European and UK prices.

 

Increased production estimates for Australia and Canadian wheat have eased the global on-paper supply estimates.

 

The eased ‘on-paper’ supply from the major exporters has increased the competition in the export market, with Australia winning back market share in Asia, at the expense of the Black Sea. While Russian wheat remains the most competitive origin for Egypt, being displaced from Asian markets will have knock on supply implications for the Russian crop.

 

While current season global wheat supplies have slightly eased, looking to next season, a record Russian winter grain area has now been outweighing a lot of the poor condition concerns. However, estimates for the size of the French wheat planted area came out slightly below expectation, failing to rebound completely due to another wet autumn.

 

The unknowns for the UK market remains Brexit. At the time of writing, there is still little clarity as to what the trading relationship with Europe might be in only a matter of weeks. There are still clear risks for UK grains should we depart and find tariff barriers in place, with the 2021 season looking to be on the knife edge of a small exportable surplus.

 

Peter Collier, CRM Agri

European: Wheat prices influenced by production estimates and weather forecasts

European: Wheat prices influenced by production estimates and weather forecasts

European wheat markets have been in consolidation mode this week following last week’s sharp falls from market highs.

 

Lower prices seemed driven by an increase in wheat production estimates for Australia and Canada, and confidence that there would be no penal Russian wheat export restrictions. Rain arriving for many of the dry corn and soybean crops in Argentina and Brazil contributed to speculative traders taking profits.

 

Physical prices remained steady, supported by demand and a slowdown in farmer selling. Traders are taking account of potential changes in the United States Department of Agriculture (USDA) world wheat and corn balance sheets, scheduled for Thursday publication.

 

Similar to the UK last autumn, French farmers struggled to complete their planting, which totalled only 4.21m hectares overall. Coupled with poor yield, this resulted in a crop 10mt lower than the previous year. Traders had been hopeful for a bounce in the French winter wheat area this year, anticipating planting of over 5m ha. However, the French Ministry of Agriculture said this week that the French winter wheat area achieved only 4.73m ha.

 

Russian wheat crop potential for 2021 remains a focus area, with one analyst highlighting poor establishment of winter drilled crops and possibility of a crop as low as 72.5mt. Other analysts are predicting a range between 78-83mt.

 

Simon Ingle, Frontier

Oilseeds: Pressure eases on oilseeds complex

Oilseeds: Pressure eases on oilseeds complex

Chicago soybeans closed 12.75 cents up on Wednesday, reversing the previous day’s trend which had been pushing to three-week lows.

 

There has been some position-taking ahead of the USDA report due later today (December 10), with managed funds buying 10,000 soybean contracts in Wednesday’s session. This cancelled out the previous day’s sales and took their long back to 203,000.

 

Continuing dry weather in South America is a supporting factor. Soybean planting continues, but the weather looks dry over the next few days and La Nina is still forecasted well into January.

 

Harvest in Australia is nearing completion. Some rain in the forecast may cause a few delays, but nothing to be concerned about. Crop estimates are being increased closer to 4mt.

 

China remains out of the market for US soybeans. Demand appears to be running out of steam, with crush margins dropping back from highs. However, it is rumoured that China has been buying Brazilian soybeans for March and April.

 

Veg oil prices were mixed this morning with rapeseed oil lower and palm higher, even with December export figures lower than expected.

 

Matif rapeseed futures rallied late Wednesday afternoon to close over €4 higher. This was helped by Russia’s imposition of a 30% export tax on sunflower seed.

 

Sterling had firmed ahead of the Prime Minister’s meeting in Brussels with European Commission president, Ursula von der Leyen but has fallen nearly 1 cent this morning on the failure to progress with a deal.

 

David Woodland, ADM Agriculture

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