Mid-week market update: Grain market daily

• UK feed wheat futures (May-25) closed at £192.90/t yesterday, up £0.60/t from Monday’s close. The Nov-25 contract rose £0.95/t over the same period, ending the session at £196.45/t.
• Domestic wheat prices followed Chicago wheat futures (May-25) higher yesterday, as the US dollar dipped from two-year highs. Forecasts of unfavourable weather in the Plains and Midwest winter wheat regions early next week also added support. However, Paris milling wheat futures fell due to a stronger euro against the US dollar and competitive exports from Russia. The May-25 contract dropped €2.25/t, settling at €236.50/t.
• The UK rate of inflation unexpectedly dropped to 2.5% in December from 2.6% a month before. This has sparked further speculation of a potential interest rate cut next month.  
• Paris rapeseed futures (May-25) fell €2.25/t yesterday, closing at €537.75/t. New crop futures (Nov-25) ended the session at €489.00/t, down €2.50/t over the same period.
• The European Commission's trade data published on Tuesday shows that rapeseed imports for the 2024/25 season, which began in July, have reached 3.28 Mt, up from 3.15 Mt a year earlier. Soybean imports have also surged during the same period, rising to 7.38 Mt compared to 6.74 Mt a year ago.

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In this mid-week market update, we explore two key factors driving global grain and oilseed markets and their effects on the domestic market.

USDA’s WASDE report

The USDA’s January 2025 WASDE report published on Friday has impacted prices this week. The lower-than-expected production and stock estimates for maize and soyabeans, especially in the US, have given the market a bullish boost. On Monday, Chicago maize futures for May 2025 reached their highest level since May 2024, closing at $191.63/t, a 1.5% increase from Friday's close. Chicago soybean futures for May 2025 also hit their highest since October 2024, closing at $391.87/t, up 2.7% from Friday.

The domestic and European markets often mirror global price movements, with UK feed wheat and Paris rapeseed futures (May-25) also seeing gains. On Monday, UK feed wheat futures reached a one-week high of £192.30/t, while Paris rapeseed reached €540.00/t. Although the rally eased yesterday, prices remain elevated.

South American crops

Soybean harvest is under way in Brazil with a bumper crop expected. However, progress is slower than last year due to rains delaying the start in Mato Grosso, the largest crop area. Agribusiness consultancy AgRural reported on Monday that only 0.3% of Brazil’s soybean crop has been harvested, down 2.3% from the previous year.

Brazilian crop agency Conab raised its forecast for Brazil’s 2024/25 soybean crop to 166.32 Mt, up from 166.21 Mt, due to favourable weather and increased planted area. Soybean exports are expected to reach 105.0 Mt, up from 98.6 Mt last season. Conab’s forecast of the country’s maize crop this season decreased to 119.55 Mt from 119.63 Mt, due to a reduced planted area and delayed soyabean harvest.

Argentina is facing a prolonged drought, threatening the 2024/25 maize and soybean crops. While rain is expected by the weekend to provide some relief, it may arrive too late to prevent damage to crops, according to meteorologist, German Heinzenknecht (LSEG). The Buenos Aires grain exchange reported that as at 08 January, 42% of the maize crop was in good or excellent condition, down from 48% the previous week.

Despite these challenges, the USDA has maintained its outlook for Brazil and Argentina’s maize and soybean crops, though this will be a key watchpoint in the next report.

Summary

The bullish sentiment for maize, driven by reduced global stocks and strong exports, is expected to support wheat prices in the short term, both globally and domestically. However, currency fluctuations may limit further gains. Despite weather issues in South America, expectations of a bumper soybean crop continue to cast a bearish outlook on prices, likely impacting rapeseed prices as well.

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