Wednesday, 22 January 2020
- UK wheat futures have continued to benefit from global wheat price increases recently. Concerns surrounding global wheat supply tightness and strong global demand going forward have supported prices. UK May-20 wheat futures increased £1.45/t to close at £158.70 yesterday.
- Chicago soyabean futures (nearby) fell to a five-week low yesterday as markets continue to await new Chinese purchases of US soyabeans for support. Expectations of a large soyabean harvest in Brazil continue to add pressure to US oilseed markets.
Black Sea maize pressuring UK cereal exports
As mentioned previously, until the end of October, the UK was on track to clear the large exportable surplus of wheat and barley by the end of the season. This season, destinations including Spain, Netherlands, Portugal and Ireland have seen the largest volume of UK exports.
Since November however, UK export trade has reportedly dampened. Concerns surrounding the difficult winter planting conditions pushed UK cereal prices above European prices, reducing export competitiveness. Furthermore, we have also seen the increased competition for grain demand from Black Sea maize exports, which started ramping up in volume towards the end of 2019.
To highlight this, season-to-date EU imports of maize were at 12.2Mt as of 20 January. Despite increased EU grain production in the EU in 2019/20, imports of maize are only 0.8Mt below last year, and 3.6Mt above the 17/18 season. Over 50% of the imports originated from Ukraine, a consecutive annual ‘norm’ as the country fast increases its maize production. Of Ukraine’s 35.5Mt maize crop, the USDA pegs Ukraine’s maize exports this season at 30.5Mt.
Despite EU wheat and barley supply reaching higher levels in 2019/20 season, Spanish production was tighter raising the countries import demand. Total maize import levels for Spain stand at 5.2Mt (as of 20 January), 0.7Mt above the same period last season. Spanish total wheat and barley imports stand at 0.65Mt (as of 20 January), 0.15Mt above the same period last season.
Global wheat prices have seen increases recently, with support filtering through to UK wheat prices. Such increases will continue to widen the spread between UK cereal and Black sea maize prices. Ukrainian FOB maize prices are currently offered at £136.32/t (20 Jan), below UK barley FOB values of £141.00/t (14 Jan). While wheat exports are likely to tail off this year given tight supply expectations in 2020/21, UK barley trade is likely to continue facing strong competition from Black Sea maize supplies.
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