LIFFEs March 23 contract slipped well below £200/t for the first time since early February last year, before the events in Ukraine began
UK wheat prices plunge to below £200/t for the first time since February 2022
But there has been more positive news on the trade front, with UK export numbers impressing
After what has been a sustained period of support for soyabeans, the market is now starting to be dragged lower by the weight of Brazilian supplies.
What to watch
European markets need genuinely fresh news
UK: Local wheat values plunge on outside market factors
LIFFEs March 23 contract slipped well below £200/t for the first time since early February last year, before the events in Ukraine began.
Overall, prices for this particular contract have traded in a huge range of nearly £200/t. Quite something.
For new crop, LIFFE wheat (Nov23) is trading at £209/t, some £12/t below last Tuesdays close, highlighting the intense volatility of our wheat markets of late.
Of course, the underlying influences pushing values lower lie offshore. Stresses across financial markets, due to bank failures on either side of the pond frightened global investors enough to sell commodities of all flavours. Further, the Black Sea grain initiative appears to have been resolved for now.
On the trade front, we have some more positive news:; exactly half the EUs barley imports have come from the UK so far this season, (with a further 46% originating from Ukraine. For wheat, we rank second, having exported 1.1mt to date. Furthermore, we are the largest supplier of oats, at 137,000t, and malt, at 12,000t (grain equivalent).
These are impressive numbers well done all.
Rupert Somerscales, Agri-analytics UK
Global: Futures decline due to extension of Black Sea export corridor deal
Wheat futures moved sharply lower again this week, reacting to the extension of the Black Sea export corridor deal last weekend. Despite demands from Ukraine for a minimum extension of 120 days, all parties ultimately agreed to Russias proposal of a maximum of 60 days. Russia said an extension of the deal beyond mid-May will depend on the removal of some western sanctions.
Russia has issued a demand for the Russian Agricultural Bank to return to the SWIFT banking system and for the import of agricultural machinery and spare parts to resume.
These are sanctions currently imposed by the West in response to the Russia-Ukraine conflict. If these demands are not met, Russia has threatened to refuse another deal renewal and to undermine Ukraines grain trade into Africa by supplying African nations with Russian grain free of charge.
Heavy selling took European wheat futures 8% lower on the week to their lowest since the beginning of 2022. Further price pressure came from improving prospects for US and EU winter wheat crops. US weekly wheat crop ratings saw a two-point improvement to 19% rated as good/excellent for primary producing state, Kansas. Secondary producing state, Texas, was up six points to 23% rated as good/excellent. Oklahoma slipped one point to 29% rated as good/excellent.
MARS, the EU crop monitor, added to the negative tone with improved yield forecasts for EU winter wheat up to an average of 5.99t/ha. This figure compares to last years figure of 5.8t/ha and the five-year average of 5.81t/ha. On the planted area, this adds 4mt and will see a potential crop above 131mt. French winter wheat crop ratings remain historically high at this stage - 95% rated as good/excellent.
Simon Ingle, Frontier
European: Markets need fresh news
With conditions for growing crops in Europe being reported as better than the five-year average, and no immediate sign on the meteorological charts that is likely to kick off the weather market, grain traders and analysts are looking for clues as to the pricing of all agricultural commodities.
Europe is a particularly tricky area when considering the supply and demand environment, and subsequently the fair value of goods, due to the effects of the Russia/Ukraine conflict.
There are some huge shifts in important activities. For example, according to the latest data from the European Commission, 2022/23 EU maize imports are significantly above last years pace, climbing 66% higher year-on-year to 19.73mt up to March 19. Ukraine has been the biggest contributor to this rise. Somewhat against early expectations, while the grain corridor has been a welcome protection of bulk grain logistics, the real boost has come from the concerted efforts to shift grain into the EU interior by road, rail and barge.
In fact, so efficient has this exercise been that several Eastern European countries are having to cope with massive supply. The EU Commission is proposing to mobilise 56 million to help Poland, Bulgaria, and Romania cope with increased imports of cereals and oilseeds coming from neighbouring Ukraine. Around 30 million is earmarked for Poland, while Bulgaria and Romania will get 16 million and 10 million.
Despite the Ukrainian ministry of agriculture projecting the Ukrainian wheat area at 4.485mha, down from 6.7mha last year and down from 7.1mha the year before that, wheat prices have fallen further.
Similarly confusing is that EU soft wheat exports (mainly to Morocco, Algeria, Nigeria, Egypt and Saudi Arabia) are 8% above last years pace. When ostensibly bullish stories such as these do not seem to offer any support, we have to assume prices have further to fall. What we need is genuinely fresh news.
John Maund, Cefetra
Oilseeds: Brazilian supplies weigh on soyabean market
After what has been a sustained period of support for soyabeans, which remained buoyant while grains came under pressure, the market is now starting to be dragged lower by the weight of Brazilian supplies.
From a speculative investor viewpoint and what had been a sustained build- up in bullish long positions, funds are far from short toward this market, but the tide is now turning. Managed money has started to shed long holdings, adding further selling pressure as Brazils crop enters global export markets.
However, looking to Argentina, concerns about the drought impacted crop continue. Another wave of unfavourably hot and dry weather has further dented yield potentials, and production estimates have fallen further.
The Buenos Aires grains exchange now estimates the crop at 29mt, while the Rosario Grain Exchange sees it at just 27mt. Notable is that both local estimates are significantly below the USDAs March WASDE estimate of 33mt.
In the last WASDE, the USDA estimated that Argentina would need to import 7.25mt to address the production shortfall and needs of the domestic crushing industry.
But with further degradation of Argentinas crop, its import requirement is likely to increase further, reducing what would otherwise have been an even greater downward pressure from a record Brazilian soyabean crop, tempering the extent of our bearish market outlook.
