Currencies

As expected, the £ has generally reacted positively against both the $ and the €, since the Brexit deal was passed by the House of Commons, although not as strongly as we would have hoped.

The new national lockdown meant that we have lost some ground, but there is growing optimism as the vaccine rolls out but is just keeping things very range bound. 

The continued weakness of $ is helping give the £ some support.  Scenes this week showing the storming of the Capital Building combined with Trump’s confusing yet inciting messages culminating in his potential indictment, have pushed the already weak dollar lower still.  It is almost becoming forgotten that the US continues to struggle to contain the spread of Covid. 

Wheat

Since Christmas, markets have continued to rally.  If you look at the March contracts, US wheat is now $18 higher, Matif €10 and Liffe, £10.  The main driver in prices appears to be the corn story in South America.  Corn prices ended the year at their highest level in 6 years as the dry weather in South America has continued and Argentina now look set to impost an export ban on corn, in the hopes of supporting their own domestic use. 

Looking at Europe, there are now no new offers of wheat from Russia post January as they head towards their export quota period starting from 15th February onwards.  Russia also announced this week that they have downgraded their 2020 crop from 40.8 MlnT to 36.3 MlnT.  This combined with increase demand from China for French material to replace the Australian tonnage they do not want to buy (due to a political argument) is continuing to support prices.

UK wheat has inevitably followed the rest of the global markets, yet is still cheaper than the French Matif so UK prices could easily move higher yet.  Although we have no tariffs post Brexit, we are still heavily reliant on imports from a tight market.  There is enough tonnage in Australia to meet demand, but that will take time to come through and means that Q1 is likely to remain tight.  The UK have revised down their figures for the 2020 wheat crop from 10.1 Mlnt to 9.658 MlnT.  The crop estimates for 2021 currently sit at around 15.1 MlnT, which would give us an exportable surplus of around 1.5 MlnT but we need to get there first!

New crop is currently trading at around a £40 discount to old crop, however, it is likely that the tightness in old crop will pull certainly the Oct/Dec position higher as we approach harvest, so although next season will see us back more in line with a normal year in terms of tonnage, it will take time for the market to adjust when there is already such a wide spread in prices between old and New Crop. 

Soya

Soya continues to rally strongly, again over dryness concerns in South America and an ever increasingly tight carryout figure for US old crop.  The USDA report next week will have to downgrade the predicted Argentinian crop now, which it did not do last time, but with China now back buying, the thought is that the old crop US carryout figures will also be reduced.  The good news over Christmas was that the strike action by port workers in Argentina was called off, but it will take time to clear the backlog with reportedly over 100 vessels awaiting loading at the start of the new year.  Soya has also been supported by the sharp rise in palm prices which have hit a 10 year high.  This has been on the back of a drop in production in Malaysia to its lowest levels in 13 years. 

And Finally…
Mars probe sends back spectacular picture of the largest canyon in our solar system.

The chasm, named Valles Manneris is around 2,500 miles long, ten times longer than the Grand Canyon and three times as deep.  It runs almost a quarter of the surface of mars.

The project is the most powerful camera ever sent to a different planet and is on-board the Mars Reconnaissance Orbiter which has been orbiting the red planet since 2006.  It was built by experts at the University of Arizona's Lunar and Planetary Laboratory at a cost of $40million and weighs 143 pounds (65kg).

Regards,
Kay Johnson & Martin Humphrey