Every action has a reaction: global weather update: Grain Market Daily

Friday, 24 January 2020

Market Commentary

  • UK wheat futures (May-20) closed yesterday at £156.75/t, up £0.10/t on the day before. The November contract closed up £0.10/t at £165.75/t. With exactly a £9.00/t spread between old and new crop, the temptation to carry old grain into the new marketing year remains for wheat but we advise caution for carrying barley stocks amid expected spring planting gains.
  • Chicago wheat futures (Mar-20) closed yesterday at $213.30/t, up $1.01/t on the day before. There is a bullish sentiment around wheat due to strong demand supporting export prices.
  • Chicago soyabean futures (Mar-20) closed yesterday at $334.18/t, down $1.56/t on the day before. This contract closed at over a month low. Demand from Chinese purchasers remains unknown, and ideal climatic conditions in Brazil have meant a large soyabean production could be forthcoming.
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Anthony Speight

Senior Analyst Cereals and Oilseeds

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Every action has a reaction: global weather update

Although political discourse can be a huge driver of global markets. Another vital parameter to engage with is global weather.

Yesterday, the International Grains Council forecast the world wheat harvested area for 2020/21 1% higher, at 220Mha. The IGC suggest “preliminary supply and demand projections point to a slightly larger global wheat harvest, and while consumption growth is assumed, there could be another stock accumulation at the end of the season”. More can be found on the IGC website here.

Considering the weather is non-threatening for most growing regions, we feel at this time the long-term global supply outlook remains benign in terms of upward price movements.

US – winter crop risk only if temperatures plummet sharply

Currently, 75% of US winter wheat is rated good/fair, analysing previous years this is not a cause for concern. What currently poses a threat to the US is the risk of winterkill. At the moment, snow cover is non-existent or very limited. This could potentially mean that exposed crop is a risk from a cold air outbreak. Although is it worth remembering that the US winter wheat crop is at its smallest since 1910.

Europe – winter crop concern/spring crop favourable

There is mix of weather conditions in Europe now. In west there has been excessive precipitation, notably France and the UK, which has in turn affected winter drilling, however there are alternatives for spring cropping. Spring planting conditions at the moment are non-threatening for Europe.

Continued dryness from high pressure that formed in south-central Europe shifted over to the east has potentially posed problems for spring growth in Germany, and soil moisture in some regions has possibly been depleted.

Throughout Eastern Europe there has been abnormally dry and warm weather for the time of year. Although winter cropping is reported to have improved on the preceding year’s drought, like the US, there remains a lack of protective snow cover that could leave crops exposed.

Argentina – late development risk & harvest dependant

Argentina has received a favourable amount of precipitation. Although, the south has experienced more dryness which has limited germination of maize and soyabeans that were planted later.  

With maize and soyabeans planting almost completed, what will be key to observe is that weather remains cool and wet during February and March. This will be beneficial for the grain and pod fill as they transition into harvest time.

Brazil – improved weather but monitor 2nd maize planting

The eastern farming regions of Brazil have recently experienced drier conditions with daytime highs of within the high 30’s (°c). This has accelerated the maturity of maize and soyabean crops and potentially affected yields in these regions.

However, towards the west in the Mato Grosso region showers have been consistent, with occasional daytime highs but high crop moisture remained. The soyabean harvest that has commenced in this region shows promising production.

In the coming months what will be key to watch is the weather around the planting and vegetative development of the second maize crop in Brazil. This is the largest crop that will be exported to global markets, hence the importance.

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