Traders were expecting a bearish US report this week, and the USDA didn’t disappoint, as both US wheat and corn stocks were raised higher. Export projections for both were trimmed and, with no fresh news from the US/China trade talks and a lacklustre demand for US wheat, further cuts in future reports cannot be ruled out. Spring crop sowings have commenced, but with weather deemed far from ideal, this could delay, or even stall, progress in certain areas. However, the recent concerns did little to deter the winter wheat crop, as ratings improved on the week.
European prices remain mixed, with old crop little changed on the week, and new crop slightly lower. Firm cash premiums, linked to another decent shipping line-up continues to underpin the old-crop market. New crop levels have eased, mainly on the French agriculture ministry’s upward revision of the 2019 soft wheat area, now seen at just over 5mln ha, an increase of 2.8% on the year.
UK prices, like those seen in Europe, are little changed. Market dynamics still show limited producer activity, although consumption buying has recently slowed, with demand far from robust as more competitive maize imports, now seen at 2mln t for the season-to-date, continues to undermine wheat usage. Main news of the week has been the EU’s agreement to grant the UK a six-month extension to Brexit, with the new deadline being 31st October – could be a very scary Halloween!
In summary, a bearish USDA should provide resistance for any substantial rise in prices. The 10mln t gain in combined global wheat and corn stocks, while providing extra assurance against new crop weather issues, still show a fall year-on-year, and in the case of maize, projects the global stock-to-use ratio at a historically low level, especially after discounting the 2/3rd of global supplies which are held within China. This will keep weather firmly at the front of traders’ focus, with likely US planting delays, and dryness concerns in the EU and Black sea regions to note
In the UK, the extension to Brexit will allow both the export, and import, of grain at zero tariff to continue until at least the new deadline, and with the reported build-up in global stocks, an expected rebound in global 2019 wheat production, and a £25-30 spot-to-harvest price discount, depending on the region, we would still suggest current prices remain attractive to growers, and would advise liquidation of any remaining old crop supplies.