The value of UK wheat spiked at the end of last week as significant devaluation of the pound continued following the appointment of Boris Johnson and following news that a no deal Brexit was more likely. The UK November wheat futures ended the week trading at £147.5/T, and offers for old crop are currently being seen at and below futures price. Sterling continues to drop in value and has reached its lowest value against the dollar in more than two years. The Bank of England is expected to report on key economic data in the coming days, so further volatility can be expected. Weak sterling is supporting the wheat price in the UK, and further weakening could make UK products cheap in other currencies and see an early start to cereal exports this season.
News for wheat globally has been mixed; the IGC lowered the world wheat crop to 763 Mln T, down 6 Mln T from the last forecast. Markets in the EU and US were slow last week, ending slightly down. The French soft wheat crop was reported by Soufflet to be the near top end of estimates at 38.5 Mln T despite the heat wave. Argentina has indicated that a record wheat harvest could be on its way. Russia’s SovEcon lowered its grain export forecast for 2019/20 by 7 Mln T to 41.9 Mln T. However, Consultancy lowered wheat export figures by 6.2 Mln T to 31.4 Mln T creating conflicting news on that story.
Demand from wheat importing countries has added support to the global wheat price after big purchases from Algeria adding to the market support. China approved a further region of Russia, Kurgan, as a `wheat import partner’, extending the `non US’ options, even as talks continue. China will not want to be in the position again where supply is so easily restricted when a dispute with a key trading partner occurs.
The price of soya bean and soya meal slightly decreased last week. However, for the UK market, weak currency is having a significant effect on the soya prices offered. Worldwide, there are more questions than answers for the soya bean complex, although ending stocks dropped a little in the last USDA report, they are still double the levels from a year ago and there are outstanding sales between China and the US of 210 million bushels that could be left outstanding as the 2019 marketing year begins. But the biggest unknown is the size of the 2019 crop. Lower acreage was reported by the USDA this month, but there is so much confusion as to how much of what crop was planted where, following the poor weather over the planting period, and improvements in the conditions more recently in the season many believe that the crop size could increase in the next report adding further price pressure.
The US and China are due to meet again but other than some goodwill purchases from China little of significance is expected by the trade. In a similar story to that reported for wheat, Russian soya beans were added to the approved list for China demonstrating again that the trade dispute will have long standing changes to the trading choices of this key player.
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