US wheat prices are slightly higher on the week, mainly due to over-spill support from firmer corn and soybean markets resulting from last weekend’s agreement between the US and China not to escalate the trade war. However, the agreement is open to interpretation, as China would need to open up its vast market, and Chinese buyers still comment that current tariffs on bean imports need to be eliminated before purchasing US beans. Australia pegged its 2018 wheat production at 17mln t. This was higher than expected, as losses caused by adverse weather during the sowing/growing season appear lower than originally feared. Canada release their updated production numbers today, with the trade looking for a small increase on the previous estimate released in September.
EU prices are slightly weaker on the week, not helped by news that Egypt’s GASC failed to secure letters of credit for at least 16 cargoes that have been purchased, causing delays in payment and confusion among suppliers. Following reports from the Finance Ministry that nothing would be done until January, shippers have been asked by GASC to delay December arrival shipments until January. Reports that Russia will send trial cargoes to both Algeria and Saudi during the next four months, looking to boost exports, is seen as a long-term threat to the EU, as the country has struggled to break into this market due to historical quality issues. The importance of these markets is shown this year, as half of the total non-EU wheat exports to date have been shipped to these destinations.
The UK market is up about £2/t on the week, with the market still focused on the Brexit vote next Tuesday. Market fundamentals continue to tighten as the festive period nears, as fresh farmer selling, and lorry availability lessen. Long-term the current price structure would indicate good values to growers, although next week’s vote, and any currency implications, will influence the direction of the next movement in prices.
In summary, the US/China deal could be read either way, but it seems to have been taken favourably by US traders. The suspension of the tariff increase is not a suspension of the trade war, it is a suspension of any escalation of the trade war, and if the parties don’t agree in further talks, are likely to be re-imposed. EU markets continue to watch signs of falling Russian exports, and with an Egyptian tender today, it is expected that Russian will take the majority share. In the UK, it remains all about Brexit and the key vote next Tuesday.