ADMISI London Wheat Report

Prices sharply higher today following the release of the latest FAO global grain stocks report. The FAO trims world cereal stocks by 64.3mmt from their December report to 802mmt (the lowest in five years), and reduce the world stocks to use ratio to 28.13% in 2020/21, a seven year low. This largely due to a 54mmt drop in Chinese corn inventories to 139mmt following an in-depth investigation by the UN FAO after record large purchases. Global corn use was raised by 21.4mmt (vs. 2019/20) to 1.179 billion tonnes, 15.5mmt of which increase was in China, where demand was increased to 190mmt and import estimates doubled from 10mmt to 20mmt.

Wheat prices followed corn higher today but also took support from the arctic blast hitting the US over the next 10 days, increasing the chances of winterkill and slowing grain movement. Added to this the introduction of the Russian formula based wheat export tax which comes into force from the 2nd June, and is calculated at 70% of the difference between the base price of wheat and $200/t. Meaning that the tax will increase as the price rises.

IHS Markit raise their 2021/22 world wheat production estimate by 1.8mmt to 777.6mmt, thanks to a 2mmt increase in China (to 112mmt).

USDA report tomorrow afternoon. 

 

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Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.

ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.                  

A subsidiary of Archer Daniels Midland Company.

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