Monday, 23 September 2019
This week's view of grain and oilseed markets, including a summary of both UK and global activity.
Delays to the spring wheat harvest in the US and Canada lend support to global wheat futures. The US spring wheat harvest is now 20 percentage points behind last year’s harvest.
Global maize prices have continued to track sideways throughout September, lacking clear direction. Warm and favourable growing conditions in the US have been pressuring markets, while production forecasts remain uncertain.
Barley markets gained a small degree of support due to the subdued recovery in wheat futures. However, domestically, there remains limited upsides for barley, needing to discount to wheat.
Global grain markets
Global grain futures
Delays to the spring wheat harvest in the US and Canada lent support to global wheat futures last week. US hard red spring wheat futures (Dec-19) gained $6.89/t during the week as the US spring wheat harvest only progressed by 5 percentage points. At 76% complete on 15 September, this is 20 percentage points behind last year’s harvest.
Global maize prices have continued to track somewhat sideways throughout September, lacking clear direction. While production forecasts remain uncertain, growing conditions in the US are for warm and favourable weather to persist, and Managed Money funds have increased their short positions.
Although growing conditions for maize in the US have been beneficial, rainfall came too late in France for the previously drought hit crop. Forecasts for French maize are for the lowest yields in over 10 years, at just 8.05t/ha (EU Commission). However, above average Ukrainian grain maize yields and large wheat crops are capping markets.
The recovery in the pound has continued, strengthening over 5% from the August low. The pound reached a high of £1=€1.1378 on Friday 20 September.
With harvest now nearing completion, Brexit uncertainty will be the largest factor for determining the direction of the domestic cereal market for the remainder of 2019/20.
UK feed wheat futures (Nov-19) gained £1.60/t from Friday 13 to Friday 20, with physical delivered prices recording similar gains.
However in what is an oversupplied domestic barley market, trading arrangement uncertainty resulted in little new export sales, keeping prices subdued.
Rapeseed supply is tight for 2019/20, with EU supplies down and Australian dryness hampering prospects for a big canola crop.
The US-China trade dispute continues to weigh on sentiment, but deputy-level negotiations have been described as “productive”. A principal-level meeting is due to take place in October and will be one to watch.
Global oilseed markets
Global oilseed futures
The attacks on Saudi Arabia’s largest oil processor on Saturday 14 September drove markets up on Monday, but many have settled back down again now. Crude oil futures (IPE Brent Crude Oil, Nov-19) closed 14.6% up on Monday but the Friday to Friday change was just a 6.7% lift.
US soyabeans (Nov-19) didn’t react as sharply as some other oilseeds on Monday. Across the week they lost $5.88/t, to close Friday at $324.36/t.
As trade negotiations commenced at a deputy-level between US and China optimism rose regarding trade of soyabeans. This was tempered by Chinese officials cancelling US farm visits on Friday. Despite cuts to US production and end stocks in the latest WASDE, there are still ample soyabeans available. With concerns around US-China trade hanging on, there is little support to prices.
If progress is made in the US-China trade talks and further purchases are made, it could ease the pressure on soyabeans and offer some support again.
UK delivered oilseed prices
Paris rapeseed futures (Nov-19) shot up on Monday, following the Saudi attack, to close €4.50/t up, at €388.00/t. Prices subsequently eased, closing on Friday at €387.25/t, €3.75/t up from Friday 13.
Despite the uptick in Paris futures, this did not feed through into UK physical delivered prices. Oilseed rape for November delivery dropped £2.50-£3.50/t depending on the location. This is due to a strengthening in sterling counteracting the slight rise in Paris futures.
The latest MARS report has downgraded sunflower yields, dropping over 400Kt from the EU balance sheets estimated production. This could offer some support to OSR prices.