The wheat price faces increasing pressure from the imminent, large Australian wheat crop.
China continues to buy US corn in volume, with another 200,000 tonnes purchased last week.
The debate around the amount of imported maize needed for this season rumbles on.
Nov-21 LIFFE wheat futures closed on Wednesday, November 25 at £159.60/tonne, a fall of £0.55/t on the week.
The last couple of months have provided a good degree of upside for wheat markets, buoyed by new crop fears in Russia, poor crop conditions in the US and strong demand for French wheat. However, the risks are now building and decreasing the number of bullish factors in the market. The wheat price also faces increasing pressure from the imminent, large Australian wheat crop.
The next couple of weeks have the potential to be pivotal for the remainder of the 2020/21 season. As Brexit negotiation deadlines draw near, be mindful of a volatile valuation of sterling relative to the euro. With trade between the UK and Europe mainly determined in euros, a strengthening pound has the potential to weigh significantly on domestic markets.
New crop plantings for 2021 are also building confidence, not only here in the UK where a small exportable surplus next season looks increasingly likely, but also a return of France as a large exporter, combined with another record winter grain area in Russia.
As a number of these new crop fears are removed from the market, it is maize and the overall feed grain complex that is continuing to provide support and La Nina dry conditions in Brazil are key to maintaining the current global grain market values.
Peter Collier, CRM
Data released by the United States Department of Agriculture (USDA) officials wrong-footed traders this week, as US wheat crop conditions have deteriorated further, while earlier rainfall argued for improved conditions. Notably, states that grow hard red winter (HRW) wheat, such as Texas, Oklahoma and Kansas, saw the largest declines. And this grade accounts for more than 40% of total US wheat production.
China continues to buy US corn in volume, with another 200,000t purchased last week. Their imports now officially exceed the 7.2 million tonne WTO-set tariff-free quota limits. Some brave analysts suggest China’s corn imports could exceed 30mt, while the USDA currently forecasts an improbable 13mt. The ongoing purchases have lifted corn prices into highly overbought technical levels, making them vulnerable to profit-taking and positioning, especially ahead of the US Thanksgiving holiday.
Further south, Brazil’s corn production prospects improved marginally, with additional rains last week. Conditions here continue to be scrutinised, to ascertain if the La Nina event holds true to form, bringing dryness and potentially reduced crop output across the continent.
Outside of the Americas, Russian wheat exports for November are forecast at around 4.8-5mt, similar to October’s volumes. Their grain prices have slipped back a notch of late, reflecting aggressive competition from Aussie wheat that is plentiful, has decent quality and, more importantly, is well priced (cheap).
Rupert Somerscales, ODA
The European markets continue to search for the next market-moving story. With most countries confident of their 2020/21 crop numbers it now comes down to demand and imports. There has been much noise around China’s unprecedented buying habits for this season and also for the 2021/22 crop, especially with regard to barley.
Trade disputes can and will cause odd things to happen but you would assume at some point Aussie barley should make its way back to China and consequently farmers have many questions to ask before they change their cropping ideas.
The continued uncertainty around Brexit trade arrangements is also causing demand uncertainty. The industry needs clarity to be able to plan ahead and move forward but every day there is no news it makes the markets nervous. Matif December wheat will also become a focus point over the coming weeks – the big open interest will need trading out which could lead to some distortions – spot versus deferred which will no doubt continue to spill into the interior market.
The debate around the amount of imported maize needed for this season also rumbles on – the price rise seems to have slowed expected imported tonnages but with 32 weeks left of the season, much can change and all eyes are still on the SAM weather/crop prospects.
Cecilia Pryce, Openfield
Oilseed markets have taken a bit of a breather in recent days, following the strong rally in prices that has seen the benchmark US soybean market surge by 40% over the past six months.
Recent talk of cancelled Chinese orders for US beans spooked markets at the start of the week and it was rumoured that some contracts were being switched from the US to Brazil. However, there would need to be a significant change in South American weather conditions before these reports gain any long term credibility amongst traders.
At a critical time for South American crop development, Argentina remains too dry and a weather report from Brazil is describing its current situation as ‘the worst performing monsoonal rainfall for over 40 years’. Until we have more confidence in those developing crops, it is difficult to see where any selling pressure might come from given the tight position on global oilseeds stocks.
Nick Baxter, Frontier
The recent Organic Trade Board members meeting highlighted the extraordinary growth the organic market has witnessed through 2020. The prospects for organic food sales remain strong as shoppers maintain loyalty to products tried for the first time through Lockdown 1.0 or see the need to alter their consumption due to environmental or animal welfare concerns that have been highlighted due to the Coronavirus pandemic. This growth, however, is not filtering back to the organic grain market where conditions remain challenging.
This market is currently being affected by Brexit. The uncertainty about the basis on which we leave the EU is having two opposing impacts at present. The organic market has an impact beyond simply the trading terms of a post-Brexit UK. There is also uncertainty about the status of UK organic certification as we currently certify to the EU regulation. However, if we leave without a deal, our organic status ceases to be recognised by the EU until we have achieved equivalence with the EU.
Despite preparations undertaken by the UK organic certifiers, we do not know how long it may take for equivalence to be granted and this uncertainty is affecting buying decisions. Sales will be interrupted if equivalence is delayed and already some UK brands are reporting reductions in export sales. This in turn makes their grain purchasing more defensive and sales harder to achieve.
Alongside this, the initial shot in the arm that the Lockdown 2.0 gave the milling market has subsided. There was little panic buying and the supply chain was better prepared and so fewer additional sales were made than was the case in the spring.
We have seen some small increases in market values for feed grains as the keener sellers are out of the market and those with grain to sell seek higher prices.
The market for milling oats and milling wheat remains good with opportunities for feed wheat but UK supply is short. The barley market, as with conventional, is the most difficult, with few malting barley opportunities and the feed market is difficult too.
A good drilling season has been a huge relief after last season, with only a few farmers reporting they have not managed to get all their planned autumn grain drilled. Possibly some forced into spring drilling last season saw benefits and have shifted their policy.
Focus is turning to spring drilling and spring wheat and oat seed is likely to be tight as some seed crops were lost. Barley seed is in good supply.
Andrew Trump, Organic Arable