Monday Market Briefing - 12th October 2020

Last week we warned that Friday afternoon fireworks could follow the October WASDE report from the US.  In the event, markets hesitated briefly before pushing higher and London closed +£2 for the day (and the whole week). Some expected a bigger drop in corn yield; world wheat stocks were actually raised slightly, (which might explain the markets pause) but soybeans were tightened further, and overall the report had enough in it to illustrate the dramatic effect China’s buying activities are having on world stocks.  Soybeans are the main driver, and South American production will be closely monitored. The region is now planting the crop in dry conditions, and their weather updates will affect all markets going forward.

Of more immediate concern, the UK Government’s self-imposed Brexit deadline arrives this Thursday. Two scenarios may play out; Boris has previously said ‘sort it out by then or forget it’, the EU will allow a little more time, at the very least we will find out if the two sides feel a deal is close enough to persevere. Exchange rate volatility will be the main feature this week in our home markets, GBP/EUR at 1.10 is thought to be roughly half way between the two scenarios. A good deal puts us back at 1.20 and no deal would mean closer to GBP/EUR  parity. It’s a £10-15 move for GBP based crop prices in either direction. After such a protracted negotiating process, no one cares to predict the next twist in the tale. Perhaps current prices are a bird-in-the-hand ? 

There are strong bids on the table in all grain sectors for nearby movement. Buyers continue to fill in their requirements at the last moment creating great value now, with little carry to later months. Speak to your farm trader for the latest bids.

Have a good week and stay safe.