Wheat
- US prices are trading up about $2-3/t on the week after earlier weakness had been negated by position-taking before and after the release of the USDA monthly report.
- There were no real fireworks in that update. USDA slightly lowered US wheat stock, whilst keeping US corn stocks unchanged.
- Global wheat stocks were reduced 4mln t on the month as higher usage offset a rise in production. Corn stocks were lowered by 2.5mln t as a result of lower production and higher usage.
- Stats Canada raised its all-wheat crop estimate for 2020/21 to 35.2mln t, up from 34.1mln t previously and 32.6mln t a year ago.
- Buenos Aires Grain Exchange reported the Argentine wheat harvest as 40% complete vs 46% a year ago, with soybean and corn plantings seen at 48% and 35% complete respectively.
- China’s National Bureau of Statistics sees 2020 corn output barely changed year on year at 260.7mln t, although many question the data.
- Russian wheat exports remained strong in November, estimated at 4.2mln t, bringing the accumulative seasonal total to 21.1mln t. 15% above last season’s pace. Rumours of an export tax being imposed on Russian wheat in order to control domestic prices have been heard this week.
- Ukraine has exported 22.1mln t of grain so far this marketing season, down 13.5% year on year, mainly due to lower maize (6.03mln t) and wheat (12.02mln t) sales.
- Ukraine’s agriculture ministry reported farmers had sown 8.06mln ha of winter grain for the 2021 harvest, equating to 98% of the expected area, including 6.1mln ha of wheat.
- Official French figures estimated the country’s soft wheat area for the 2021 harvest at 4.73mln ha, up 12.4% on last season’s final area, but down 5% from the level seen in 2019.
- The forecast for French non-EU soft wheat exports during the 2020/21 season was increased to 6.95mln t, although end-season stocks were left unchanged at 2.5mln t.
- Grain trade association Coceral forecasts soft wheat production in the EU (including the UK) will rise next year to 143mln t, up from a revised figure of 127.9mln t in 2020.
- UK prices have remained steady during the past week, although sterling has weakened as the likelihood of a Brexit UK/EU trade deal seems to be receding.
- A Brexit no-trade deal means that the UK will move to WTO terms and conditions regarding trade, and the impending introduction of tariffs, on both cereal imports and exports post 1 Jan 2021.
- For UK farmers, this should continue to support farm gate prices in the current marketing year, as we need to import. The cost of importing grain into the UK, both from the EU and potentially Third countries depending on the quality of the wheat, will increase from 1 January 2021. It remains unclear whether the UK will be given its share of the EU tariff rate quota (2.4mlnt annually at €12/t) for the current season; the non-EU TRQ import tariff is set at €95/t.
- After 2020’s poor harvest, the dependency on imports for 2020/21 marketing season has dramatically increased. This means that UK prices must get to and stay at import parity to allow the necessary levels of imports to balance supply and demand, unless non-traditional grains (sorghum/tapioca etc) somehow replace the need for wheat.
- However, for 2021/22, a different scenario is looming. The expected rebound in the UK winter wheat planted area should ensure production returning to a more ‘normal’ level, weather permitting. This places the UK back into a surplus position and the need to export. As tariffs for exporting to the EU will also be adopted, UK prices will need to price these tariffs into export quotations, meaning potentially lower farm prices than we would have seen in a zero-tariff situation.
- With this unprecedented ongoing uncertainty overhanging the grain sector, placing crops into ADM Agriculture’s pool for harvest 2021 takes away the marketing uncertainty for all pool members. Our pools are open for 2021/22. Please speak to your farm trader to find out more.
