What to watch: New crop is all about the weather and how much is planted.
Wheat futures rebound after dipping lower in a couple of sessions.
Since the beginning of the month, Paris (MATIF) wheat futures have gained €4/tonne, supported by a firmer global market.
Global oilseed markets have taken a rough path over the last few weeks.
May-20 LIFFE wheat futures closed on Wednesday, November 27 at £150.75/t, up £0.65/t on the week.
The UK’s Nov19 LIFFE wheat futures contract expired this last week, settling at £140.80. During its lifetime the contract has traded between £129.75 and £174.90/t. Attention now turns to the May20 position. After a couple of sessions in which UK wheat futures dipped lower, values have started to rebound again. This, despite a slightly stronger pound and further weakness on the influential Euronext and Chicago futures markets.
The AHDB released its preliminary Early Bird Planting Survey results on Monday. The data shows the area sown to wheat forecast to be 9% lower than last year, at 1,645,000 hectares. If realised, it would be the lowest area sown since 2013. AHDB will re-do the survey in the new year, which will include very late drilling information. These numbers appear quite optimistic in our view.
Clearly, ahead of drilling, farmers and the trade were anticipating a substantially larger wheat area and as a result the market has been trying to take a sharply lower 2020 production outcome into consideration.
While the market’s focus has primarily been on new crop prospects, the old crop market has also benefited.
Farmers are, in the main, reluctant sellers of anything right now and with merchants likely to have added to their sales books recently, nearby cash markets are tightening up.
Rupert Somerscales, ODA
Since the beginning of the month, Paris (MATIF) wheat futures have gained €4/t, supported by a firmer global market.
Continued interest from exports – the soft wheat tonnage is just over 50% higher on the year at 10.77mt – and competitively priced EU wheat continue to underpin cash values, especially given the onset of the festive period and associated slowdown in ex-farm sales.
With most key international buyers covered into the new year, markets may pause for breath, which may leave them open for bouts of profit taking.
Reports that the president of Russia’s Grain Union expects prices to become more competitive due to the country’s slow export pace may provide some resistance against higher prices, particularly with talk of a bigger wheat area for 2021/2.
However, the EU’s crop monitoring unit predicts this autumn’s heavy rains will reduce the wheat area in France and the UK. In addition, weather conditions are not ideal across Europe – too wet in the West and too dry in the East.
In the Black Sea region, much lower temperatures are forecast, with no snow cover to protect recently sown and emerged crops.
In summary, the outlook as we enter the new year will depend on how aggressive Russian prices become and how they compare with export values. Further ahead, new crop is all about the weather and how much is planted.
David Woodland, ADM Agriculture
America’s benchmark CBOT traded almost 16 cents firmer on Monday, mainly due to short covering ahead of this week’s Thanksgiving holiday. There was also some spill-over support from the EU where news of delayed drilling continues to filter through. The US corn harvest is now 84% complete, with more heavy snow forecast for the long weekend. Despite this, a common theme that continues to burden US wheat and corn prices is a distinct lack of price competitiveness on the global market.
For wheat, Europe and the Black Sea continue to mop up the bulk of demand while for corn, cheaper cargoes from South America and Ukraine are the main competition. As such, it’s unlikely we will see any sustained rally in either until we see a fresh demand driver.
MATIF wheat futures traded to a five-week high on Wednesday as charts and fundamentals both turned supportive. Slow farmer selling, pitched against heavy export campaigns out of France, Germany and the Black Sea, compound reports from Monitoring Agricultural Resources (MARS) that the EU wheat acreage is in decline due to the recent wet weather.
Domestically, the picture remains very uncertain, with planting surveys recognising the difficult drilling campaign in their latest figures. The AHDB released its Early Bird Survey results, which forecast a 9% reduction in wheat plantings, with current intentions of 1.645m ha. Furthermore, the adverse establishment and the higher than usual proportion of late sowing led Stratégie Grains to forecast a UK yield of 8.10t/ha. This would be 3% lower than the five-year average but we expect this figure to be revised as the crop progresses.
Cameron Curry, Frontier
Global oilseed markets have taken a rough path over the last few weeks. The highs have been matched with similar lows as news stories never seem to send the markets in the same direction.
The EU continues to import OSR, with amounts now reaching over 1.46mt more than this time last year. The speed of arrival is relatively fluid, but with the Australian ships looking to be lining up – regardless of their smaller crop, it feels like imports will keep the lid on any price upside short term.
The debate over palm and soya oil and their environmental criteria seems never ending with added uncertainty raised by Brazilian farmers planning on lifting the Amazon Soy Moratorium. Consumer power is something we all need to be following, as the impact on trade could prove to be more powerful than ever expected.
With US cargos of soya still not discharging in China and with South American soya having been more price competitive recently, tempting new Chinese purchases, it would be a brave trader to anticipate where prices go next, especially with still a lack of trade deal clarity.
Cecilia Pryce, Openfield
Poor autumn conditions have hampered autumn planting over recent weeks with some farmers reporting they have not drilled any organic winter crops. Whilst this has led to a strengthening of conventional wheat values as markets foresee a far smaller UK wheat harvest, the same dynamic has not been seen in the organic market for the following reasons:
So what does this mean for values? There is quite a spread in the market, with some buyers paying more to support UK production. For these buyers a value of £250/t ex farm for organic feed wheat is available but for those focussed on imported supplies, a value of £235/t is more likely. Feed barley is at parity with wheat, with feed oats a further £5/t discount. Beans are worth £355/t ex farm but cheap offers of organic peas are eroding that value. Milling oats are trading at £260- £280/t ex farm and so continue to outperform other crops.
Andrew Trump, Organic Arable