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Grain merchants are warning of hiccups following the trade deal agreed between London and Brussels relating to the movement of goods between the UK... Traders warn of ‘hiccups’ as UK gets to grips with Brexit

Grain merchants are warning of hiccups following the trade deal agreed between London and Brussels relating to the movement of goods between the UK and European Union.

The last minute trade deal was announced on 24 December – just one week before the end of the Brexit transition period. ADM Agriculture head of grain trading Jonathan Lane said the agreement had at least clarified the relationship between the UK and EU.

“With no tariffs or quotas to be applied, grain imports and exports can continue freely,” he said.

“This is seen as a positive move for the UK, given its increasing dependency on imports for this season due to the lower crop forecast. There have been, and will be, hiccups but in practice imports and exports should continue.”

Mr Lane said the agreement would aid UK growers looking to market their 2021 wheat crop. An expected rebound in production would return the UK to being a net exporter – but tariff-free exports to the EU would avoid the need for the UK to chase trade with third countries. This would have affected farm prices, said Mr Lane.

Market report

A Defra update on its 2020 UK crop estimates has pegged wheat production at 9.658 million tonnes. This 40% year-on-year reduction is due to a 24% drop in area (1.387mln ha) and poor harvest averaging just below 7t/ha.

Talk of diminishing export availability in the Black Sea has supported a rallying grain market last month. Grain prices were considerably higher, with the US market up $18/t, Matif up €10/t, and London up just over £10/t on March 21 positions.

Prices were also buoyed by demand from China and concerns over South American corn and soybean production due to dryness. Talk suggests reduced South American output could push additional export demand into the US.

Meanwhile, Argentina announced it was suspending sales of corn for exports until 28 February. Mr Lane said the surprising move was part of efforts by the Buenos Aires government to ensure ample domestic food supplies.

Downgrade

Closer to home, Russian agency SovEcon downgraded its estimate for Russia’s 2020/21 wheat exports to 36.3mln t from 40.8mln t previously. The revision was due to an upcoming export tax aimed at stabilising domestic food prices.

Conversely, Ukraine’s trade union has reported government assurances that no additional grain export limits will be imposed for the 2020/21 season.

Egypt’s supply minister reports the country has strategic wheat reserves sufficient for 5.5 months. But Morocco has extended its suspension of import duties on soft wheat until 31 May to ensure regular supply amid low domestic output.

Oilseed rape

In terms of oilseeds, an interesting start to the new year saw Chicago Board of Trade soybeans making new highs in every session. Prices shot though the $13 target at the end of 2020, to trade over $13.50 in the first few days following the Christmas break.

Again the market was supported by dry weather in South America. Matif rapeseed started the year by trading at contract highs and continued to do so for the past four sessions. Canadian canola also traded higher for six straight sessions.

UK rapeseed prices hit season highs. Investors turned attentions from the Brexit deal and focused on escalating Covid 19 cases and renewed lockdowns. Sterling fell back from recent highs against the euro, which lent support to UK prices.