Market Overview
Following a week of strong gains for UK wheat prices, the market has come under pressure with UK-Feed wheat prices falling. Both the Pound and Euro have gained relative to the dollar over the past few days after the pound fell sharply following the Chancellor Kwasi Kwarteng’s announcement regarding the mini-budget. On Monday 26th September it plunged to the lowest level the pound has ever been against the dollar, reaching $1.04. It has since gained strength, closing yesterday at $1.15.
The weakness of the pound to the dollar caused prices for global commodities to gain support and rise. Since the announcement and the subsequent weakness seen of the currency, several materials have been extremely volatile.
Exports out of Ukraine continue to make progress following the trade agreement to allow a secure export corridor out of the country. Ukraine exported 1.3 million tonnes of Wheat through the port of Odessa in September, 50% lower than last year but the pace is clearly speeding up. Black Sea Exports could therefore come back to normal for October but it is reasonable to question the strength of the export agreement. The terms and conditions of the current agreement are due for renegotiations in November and the recent growing conflict and tensions between the two countries has cast doubt over how long the corridor will remain secure.
Ukraine’s Ag Ministry reported winter wheat planting at 1.1Mha, down from 3.1Mha this time last season. Estimated acreage for this year is around 3.6Mha to 4.0Mha, 30% to 40% down. 2023 production could therefore range between just 15Mt to 18Mt.
Winter wheat planting in the US has now fallen behind average, reaching just 40%, 4 percent points behind the average. Dry and poor weather conditions are behind the drop in plantings. As of the 29th September, Russia has harvested 101.8Mt of wheat with an average yield of 3.61t/Ha compared to 74.4Mt and 2.8t/Ha as of the same date in 2021 according to SovEcon.
Maize plantings in Argentina are only at 6% compared to 11% last year. It is probable that the area will be significantly down as farmers are not willing to invest in an expensive crop under such dry conditions.
US maize harvest progress has now reached 20% complete, slightly behind average. According to the European Commission, EU maize imports during the 2022/23 marketing year are more than doubling last years pace so far, with 7.37Mt since the start of July.
Argentina and Brazil are currently forecast to produce a combined soybean crop of 198.4Mt, the highest output from these two countries ever. The sentiment of such a large crop could have the potential to weigh on global soybean markets. If production is even higher, this could pressure global soybean markets further. However, much depends on the outlook of weather conditions for each country. The South Pacific is currently in the midst of a third successive La Nina. This has the potential to bring hot and dry weather to the continent. That could impact soybean planting at the end of 2022 and crop development going into 2023. Therefore if hot, dry weather do materialise, soybean prices could potentially gain support due to the negative impacts it would bring. Global rapeseed prices would also be influenced by either scenario.
