Wednesday, 21 August 2019
- UK feed wheat futures lost more ground yesterday closing down a further £1.40/t, at £135.85/t. The latest move lower follows further confirmation of ample global wheat supplies.
- Forecasts for the Ukrainian wheat harvest, and subsequently exports, have grown once more. The Ukrainian grain trader union, UZA, have suggested exports from the Black Sea nation could reach as much as 21.0Mt this season, up from 15.5Mt last year.
- There could be some support for wheat prices against a bearish backdrop from the ongoing crop tour in the US Midwest. Yields in Indiana and Nebraska are estimated down year-on-year.
Lacking US biofuel demand undermining grain prices
- Larger than expected maize production forecasts have seen prices for the crop pressured in recent weeks.
- Additional exemptions for biofuel blending could reduce demand for maize, further limiting prices.
- That said, ongoing US crop tours currently see yields significantly down year-on-year which could offer further support.
Over the past few months the direction of US corn prices has been a significant focus for EU grain markets. Thoughts of tighter production in the US maize belt caused prices to rise considerably before last week’s USDA supply and demand estimates bought them crashing down. Prices of corn could now be further undermined.
Last week the US government announced a series of exemptions to oil refineries reducing the volume of ethanol required to be blended into fuel. The exemptions have the potential to cut demand for ethanol in the US and subsequently reduce the demand for maize, the primary feed stock for US bioethanol.
Production of bioethanol in the US Midwest was marginally down year-on-year in July, a trend which has continued into August. If we see further reduction in bioethanol demand from oil refineries as a result of the latest exemptions then support for corn maize prices could wane further.
There is still the potential for some maize price support in spite of the blending exemptions. Ongoing crop tours in the US are highlighting yields sharply lower than a year ago, and below the USDA estimates.
- In Ohio, maize yields have been estimated at 10.38t/ha, down from 12.08t/ha last year and 0.67t/ha lower than the three year average.
- In South Dakota, yields are estimated at 10.36t/ha, down from 11.97t/ha last year and 0.31t/ha below the three year average.
- Yields in Nebraska are seen at 11.60t/ha, above the three year average but below last year’s 12.05t/ha
- Indiana yields are estimated at 10.86t/ha, down on the year and 0.95t/ha lower than the three year average.
The current USDA forecast for maize yields is pegged at 11.40t/ha.
The next USDA production estimates are due on 12 September, and will be watched closely for maize price direction.
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