Monday, 15 July 2019
This week's view of grain and oilseed markets, including a summary of both UK and global activity.
Harvest is underway in Europe and the UK. The market looks well supplied, but awaits further yield information. At £132.50/t (FoB, Harvest), UK feed barley is currently export competitive.
Russian and European production forecasts have been revised down, reducing the forecast global surplus. However, production is still forecast at record levels. US maize will continue to influence market direction.
The USDA increased its US production forecast. However, a lack of confidence over the US area, and unfavourable hot and dry forecasts for the US have supported a short-term rally.
Global grain markets
Global grain futures
The US is forecast to be drier and hotter than normal leading to a more bullish, US centric, feel to markets in the short-term.
Chicago maize futures have gained due to the hot and dry adverse weather forecasts. However, the rise could be limited by increased South American maize availability competing for export sales. The Brazilian Safrina maize crop harvest is now forecast at 72.36Mt, 34% larger year-on-year. Total maize production is forecast at 98.5Mt (Conab).
In the latest USDA supply and demand estimates (WASDE), global wheat production for 2019/20 was reduced by 9.4Mt. Russian wheat production was lowered by 3.8Mt to 74.2Mt. Also, after the brief heatwave across Europe, production for the region is forecast at 151.3Mt, down 2.5Mt month-on-month.
Elsewhere, the Ukrainian wheat harvest is progressing well at 37% complete according to UkrAgroConsult, 14% ahead of last year with yields up 0.43t/ha.
The #AHDBCropTour is now coming to an end. UK cereal crops are in general looking good. However, disease pressure has led to varied yield expectations.
With a larger wheat crop expected, exports will be more important this season. At £143.00/t FoB on 9 July, UK feed wheat is pricing above that of Black Sea origins. Prices may face further pressure, depending upon the size of the harvest. The barley harvest is underway and export prices are competitive. However, Brexit uncertainty will mean that UK feed barley needs to remain price competitive.
The picture for EU rapeseed continues to tighten. Reports of low yields and poor oil content in France has pushed prices higher. Furthermore, yields are below last year in Ukraine.
The world outlook has tightened with the reduced US area. Global ending stocks are now forecast at 104.5Mt, down 8.1mt month-on-month. But, stocks remain the second highest on record.
Global oilseed markets
Oilseed markets moved higher last week. Soyabean markets firmed with the US area planted to soyabeans down year-on-year. The combination of reduced area and concern over above average temperatures pushed prices higher.
Last Thursday’s USDA supply and demand estimates (WASDE) highlighted an 8.1Mt reduction in global soyabean stocks. A large amount of the fall in stocks was driven by a 6.8Mt tightening in the US stocks outlook. Despite the cut, global soyabean stocks are still forecast at the second highest level on record.
Oilseed markets have also gained support from increases in the value of crude oil. Ongoing tensions between the West and Iran has resulted in brent crude oil reaching its highest point since the end of May.
Looking ahead, further tightening of oilseed balances could offer support to what is an otherwise well supplied market.
Global oilseed futures
UK delivered oilseed prices
Rapeseed prices (UK physical and EU futures) firmed last week. EU production forecasts continue to reduce. Oilworld estimate that EU rapeseed production could be as low as 17.5Mt (www.Oilworld.biz). This reduced outlook increases the need for EU prices to be at import parity.
French rapeseed yields are being reported at 2.5t/ha to 3t/ha, down on the five year average of 3.2t/ha. The Ukrainian harvest is now 50% complete, yields are forecast at 2.2t/ha, compared with 2.4t/ha last season. Ukrainian rapeseed production is still expected to reach record levels this season. It will be needed to support European shortfalls.