Monday, 4 November 2019
This week's view of grain and oilseed markets, including a summary of both UK and global activity.
Old-crop wheat markets drifted over the week for both US and UK. The downgrade of Australian production could be dropped further as harvest commences and yields are confirmed.
Maize harvests for US and French farmers are behind last year but continue to progress and are generally factored into pricing. Friday’s WASDE report could well move markets next week.
Brexit uncertainty remains and will continue to weigh on domestic markets with a historically large crop. September export data due for release next week will confirm if record exports remained.
Global grain markets
Global grain futures
US wheat (May-20) lost $0.83/t from Friday-to-Friday (25 October – 01 November), following the same trend as Dec-19. However, from Friday to Thursday (31 October) US wheat futures (May-20) lost $3.49/t before re-stabilising. UK feed wheat futures (May-20) closed Friday at £146.20/t, just £0.20/t up from the previous week.
Argentina’s wheat production estimates have been further reduced by Buenos Aires Grain Exchange to 18.8Mt. Currently just 3.5% of the Argentinian wheat harvest is complete, as yields are confirmed there could be further changes to production.
Australian wheat production is also historically low according to most reports. The National Australia Bank (NAB) has estimated Australian wheat harvest of 2019/20 to be just 15.5Mt due to the dryness of the past 3 years. Although eastern Australia has received some welcomed rain this weekend it is too late for grain producers.
US winter wheat plantings continue to progress well, pressuring new crop prices.
UK markets continue to be pressured by Brexit uncertainty with the extension length unknown. Grain exports for July and August were at record pace and HMRC data, due for release next week is expected to show similar for September. On the back of this, EU buyers are reportedly stocked up and capacity for significant volumes over the next few months may be limited.
Although delivered barley prices rose £1.50/t on Friday on the back of a rise in Nov-19 feed wheat futures, the lack of clarity for export markets for a historically large crop will continue to weigh on prices.
Rises to European rapeseed futures enabled domestic prices to increase. Looking forward, reductions to palm oil supply forecasts will support EU markets. Forecast EU rapeseed supply for 2019/20 remains tight.
Total commitments of US soyabeans to China are up year-on-year, but below pre-trade dispute levels. Rainfall across Brazil helped alleviate dryness issues, allowing soyabean planting to progress.
Global oilseed markets
Global oilseed futures
Nearby soyabean futures are approaching levels similar to those seen in June 2018. Over last week, Chicago soyabean futures (Jan-20) recovered from early losses to finish the week up $0.82/t to $344.16/t.
Soyabean markets were supported towards the end of last week by wetter weather over some northern US regions, particularly North Dakota and Minnesota, slowing the soyabean harvest.. Reports indicate the ‘phase one’ US/China agreement could be signed around mid-November, potentially providing additional support to soyabean markets.
Palm oil futures have increased on recent October gains, up 4.9% Friday-Friday over the last week, with a tighter supply and demand outlook.
UK delivered oilseed prices
Last week, UK delivered rapeseed (Erith, Nov) increased £2.00/t to £331.50/t, with support seen from European rapeseed futures.
EU imports of rapeseed have continued at record pace. Imports were at 2.57Mt as of the week ending 27 October, with Ukraine and Canada accounting for 95.4% of import origins. The Canadian harvest of canola continues to be affected by precipitation, remaining incomplete. EU imports of rapeseed were 1.2Mt higher than last year for this point in the season.
The approaching EU rapeseed supply tightness will have a significant effect on rapeseed oil supplies. A 1.0Mt decline in EU rapeseed crushing this season is expected, according to Oil World (www.Oilworld.de). Reports of some low oil yields across European countries will have an effect also.
There is a likelihood that some EU vegetable oil demand normally met by rapeseed oil will be covered with alternative products, depending on end use.