The US market is down £2-3/t on the week, as the US continues to struggle with its export pace and the lack of meaningful data due to the partial government shut-down. US exports were reported still being down 11% y/y, against a perceived yearly increase of 11%. Colder temperatures are forecast for most of the main wheat growing areas during the remainder of January, although significant snowfall in the eastern parts should insulate crops. The southern and central plains have little snow cover and may be exposed, although moisture levels remain adequate.
European prices have eased €2/t on the week despite a weaker US$ exchange rate. Soft wheat exports to non-EU countries remain sluggish, reported at 8.67mln t so far this marketing year, down 26% y/y. However, with soft wheat imports up 164% and maize imports up 148%, it appears that the EU is not short of feed grains, although analysts may have to start readjusting internal S&D estimates. Despite the Russian agriculture minister denying any discussion on limiting exports, the market is already doing the job. The rise in the country’s domestic wheat prices should see January wheat exports fall substantially to around 1.5mln t. If the trend continues for the remainder of the season, that would project a seasonal total of around 33mln t, well short of Russia’s aspirations.
The UK has been dominated by Brexit. Against expectations, sterling firmed after the prime minister’s deal was rejected as the city viewed the outcome as positive to sterling, due to the now likelihood of a softer Brexit. However, the PM now has to come up with a “Plan B” and has asked for cross-party talks to try and find a way forward for Brexit, although Jeremy Corbyn has refused to join talks unless the threat of a no-deal exit was ruled out.
In summary, global prices continue to try to reallocate export demand, although with the potential of US, EU and Russian exports being lower than projected, genuine concerns are being raised over actual global demand. EU traders wait to see if the recent slowdown in Russian exports will be sustained and whether demand is switched back into the bloc. The UK remains focused on Brexit and its ramifications upon the UK’s financial, economic and currency markets, and thus grain prices.