While weather continues to sit in the driving seat of global wheat markets, currency is seeing significant movement.
Following the USDA report two weeks ago, the Chicago market saw some follow-through buying on the back of potential effects of dryness on new crop prospects in the US and Russia, but the rate of appreciation has slowed in recent days, according to ADM Agriculture.
“However, market eyes continue to focus on the ongoing lack of rain in Russia, as well as eastern Ukraine, and on the effects of recent snowfall on new crops in central/northern US,” said Jonathan Lane, ADM Agriculture’s head of grain trading.
Market researcher SovEcon is continuing to forecast a 10-15% reduction in Russian winter wheat sowings, although rain in central regions will have helped over the last week.
“Russia is expected to export around 50 Mt of grain in the current marketing season, up 5 Mt on its previous estimate,” said Lane. “However, it remains to be seen whether any export quota will be introduced in the first half of 2021 to protect domestic supplies. Exports to the end of September 2020 were marginally down at 11.6 Mt.”
Currency has seen some significant shifts, with the US dollar hitting a seven-week low. The UK pound has seen substantial volatility this week as the Brexit negotiations rollercoaster continues. Values ranged from 1.28-1.315 against the dollar and 1.095-1.11 against the euro.
“UK wheat futures old crop values have appreciated about £5/t on the week, following a similar pattern on the MATIF,” continued Lane.
“UK sellers of October-December 2020 wheat seem to have taken out most of the demand. However, January-July 2021 is a different picture, with very little market discussion on a physical side for feed grades. Flour millers have been more active,” he concluded.