Monday, 22 July 2019
This week's view of grain and oilseed markets, including a summary of both UK and global activity.
With harvest underway in the US and across Europe, markets have been sliding, while awaiting yield and production data. UK Nov-19 trading between £145.00/t - £150.00/t.
The hot and dry weather across much of Europe, has impacted European maize yields. This will be important for the overall grain and animal feed supply and demand picture.
With harvest well underway across Europe and the UK, markets are pricing at export competitive levels with vessels being loaded at multiple UK ports.
Global grain markets
Global grain futures
US benchmark grain futures (wheat and maize) fell last week, setting a bearish tone to markets. Managed money funds in Chicago wheat futures reduced their long positions, selling contracts.
The advancing wheat harvest across the northern hemisphere added to the bearish outlook, with indications of good quality in the US. Further, cooler, favourable conditions in the US for maize and soyabean development are forecast to persist into August, improving the outlook for yield development. Additionally, with the majority of the Brazilian safrina maize harvest complete, yields are reportedly above average or even at record levels in some areas.
However, there are diverging trends, owing to the hot and dry weather, European maize futures have pushed higher, offering support to wheat markets. As such, although both European and UK wheat markets have fallen overall, the loss has been less than that of US futures.
With the UK barley harvest underway, vessels are being loaded as the domestic market remains export competitive. Harvest feed barley delivered in East Anglia was quoted at £126.00/t last week and FOB at £134.50/t.
Meanwhile UK feed wheat futures (Nov-19) have been finding support at £145.00/t and a ceiling at £150.00/t and will likely continue to trade between these levels until further production data becomes available. The premium for bread wheat over that of feed has also contracted. However, weather will now be of greater importance for quality over the next month.
The European rapeseed outlook remains tight. Ukrainian production forecast remains relatively high, despite yields and oil content being lower year-on-year. This will add pressure to availability for European imports.
Although conditions have improved recently, the US area is still unknown adding uncertainty to the supply picture. However, global supply is still looking heavy.
Global oilseed markets
Global oilseed futures
Chicago soyabean futures (Nov-19) dropped whereas Paris rapeseed futures (Nov-19) gained last week. The US soyabean area remains uncertain but growing conditions improved as weather cooled and forecasts remain favourable.
US soyabean stocks are still high. Export rates from the US will need to reach 0.93Mt/week to clear committed export volumes (9.3Mt), of which 5.2Mt is destined for China. The US-China trade dispute is still unresolved and therefore much of this export stock could carry into the new season.
Brazilian soyabean exports are also down. According to SECEX, the first 2 weeks of July saw a significant drop of 1.82Mt in exports compared to 2018, at just 3.46Mt. Similarly Canadian canola imports into China have slowed, also resulting in mounting oilseeds stocks.
Although the EU are undoubtedly facing a tight supply the global complex is still relatively well supplied potentially placing a ceiling on increasing European rapeseed prices.
UK delivered oilseed prices
Paris rapeseed futures (Nov-19) gained just €0.75/t week-on-week but UK oilseed rape saw a greater increase. OSR delivered into Erith in November gained £1.50/t on the week, resulting in a £27.50/t gain since 15 March.
UK harvest area remains uncertain although an overall reduction in planted area is known. UK OSR harvests are underway recording yields 2.5t/ha to 4t/ha. If UK yields stay low, UK supply could be tighter than initially anticipated adding support to domestic prices. Further support to domestic prices comes from the weakening sterling.