Monday Market Briefing - 14th December 2020

Old crop wheat surged £10 higher from the previous week’s losses setting new highs by a distance. It was a busy week in news terms. The USDA produced another report which showed global end of season stocks tightening a little, but they still haven’t fully factored in China’s corn imports – further adjustments will surely follow. Russia is in the habit of reviewing grain exports at this time of year. Reports that internal taxes might be applied to wheat exports were seen as an attempt to calm domestic prices, but provided the main driver for the week’s gains.

Meanwhile, BREXIT negotiations rumble on. Even at this late stage a deal is still widely regarded as the most likely outcome. Reports on Sunday evening that the EU has softened one of its key demands on future compliance are important if true, and may help to push things along this week. We saw some volatility in GBP either side of the weekend as the mood swung, but banks seem to be of the view that big currency moves whatever the outcome or not very likely. From our own industry perspective, we have to acknowledge that heavy agri-tariffs are a key component of the much discussed ‘Australian’ deal we may yet end up with. Fortunately, the old crop situation is pretty tidy in the UK and we wont have an immediate problem if exports are impeded. New crop would be another matter; at the moment UK prices for the next crop are discounted quite sharply to the continent - not quite enough to offset possible tariffs but close enough. (The importance of  growing crops our customers want to buy will never have been greater, if we expect EU buyers to use quota’s to get access to them)

Quite a lot going on then, the market looked over-sold a week ago, after Fridays surge it now looks a bit ‘toppy’. It should struggle to hold onto all the gains and we call it lower for this week, but it’s still fundamentally supported even at such high levels.