Monday Market Briefing - 5th October 2020

Markets have been driven to new highs in recent weeks by simple physical buying activity, but last week by contrast was more about good old supply and demand statistics. We drifted lower in the first part of the week until USDA produced a quarterly stock update that unexpectedly removed 8 million tonnes of corn from US stocks. That was enough to bring bulls back in and with another USDA update due this Friday, world S&D this time, trade will be cautiously supported throughout this week.

Will we get more surprises in this report? The October WASDE (World Agriculture Supply & Demand Estimates) is often a key one as it’s the first to contain real harvest yield data. Throughout the run up, USDA has been predicting record corn yields and with field reports suggesting more average numbers, another adjustment to lower corn availability is expected. The market response this week will depend on where the USDA figure sits relative to trader’s expectations. We don’t expect the market to fall this week with such a big report looming, but Friday afternoon fireworks in either direction are distinctly possible.

In the meantime, spot and pre-Christmas demand at home is very healthy; UK markets are slightly inverted meaning the Nov20 price is higher than May21 on LIFFE futures. With no clear carry to later months selling October or November is the best choice, and demonstrates where real physical demand is focused. Buyers for now don’t want to contemplate the later season months (and COVID constraints are all the justification needed). Milling wheat and malting barley both continue to trade freely at season highs and farmer activity has increased with some farmers finishing autumn drilling already, allowing time to refocus on available grain markets. We are particularly keen to see full-spec Group 1’s for UK flour mills, and soft wheats for potential pre-Brexit export markets.

Have a good week and stay safe.