Monday, 6 April 2020
This week's view of grain and oilseed markets, including a summary of both UK and global activity.
Large global production forecast for 2020/21, but dryness in the Black Sea is a watch point. Low export demand for the US and export restrictions for Russia limit old crop demand.
Large US crop forecast for 2020/21, and large safrinha crop expected in Brazil (2019/20) although dryness is a concern. Demand is limited in the US due to weak crude.
Large crops are expected globally; French spring plantings are now almost complete. In the UK, continued forecasts for dry weather will exacerbate expectations of large spring crop plantings.
Global grain markets
Global grain futures
Global wheat futures continued to fall last week before recovering slightly on Friday. Maize futures weakness has continued with the market staying in oversold territory there could be some support.
Maize market weakness has stemmed from reduced demand in the US on the back of weak crude oil and reduced fuel demand, and reduced ethanol demand. However, potential agreement between the US, Russia and Saudi Arabia over oil production caps could offer some support, for crude and subsequently ethanol/maize.
While the outlook for maize remains bearish owing to large global supplies, one or two supporting factors are beginning to emerge in Brazil. Dryness in the southern safrinha crop regions of Brazil and reported stronger ethanol demand have supported cash prices.
For wheat, we seen some pressure from reduced US export sales, coming in below industry expectations at 73Kt. Support for export prices was seen when the Egyptian state grain buyer (GASC) cancelled their latest wheat tender last week, shortly after announcing it.
Black Sea politics and conditions continue to be an important watch point for grain markets. Last week the Russian government agreed to limit grain exports to 7Mt, you can read our take on this situation – here.
From a crop conditions perspective the region remains dry. Soil moisture indices are well down on year ago levels, with rainfall lacking in the forecast. While not critical yet, it is a situation that requires monitoring.
Data out this week: USDA crop conditions (6 April), USDA supply and demand estimates (9 April)
UK delivered feed prices (quoted as at Thursday 2 April) saw significant falls last week in line with global markets. East Anglian delivered feed wheat (May) was quoted at £157.00/t, a fall of £9.00/t on the week.
Milling wheat prices fell by a similar amount, Midlands delivered bread wheat (May) fell by £9.50/t, quoted at £180.50/t. Meanwhile North-West delivered bread wheat (May) fell £9.00/t, to £191.00/t, £37.80/t over May-20 feed wheat futures.
Feed barley prices resisted the move lower but having opened up a huge discount to wheat over the past fortnight, this is not greatly surprising.
On Friday, we published a report looking at crop conditions as at end-March, 49% of the winter wheat crop was rated as “good” or “excellent”, with 6% not yet emerged. The wet weather through winter has hampered crop development with 45% of winter barley considered “good” to “excellent”.
Data out this week: Corn Returns (6 April), Delivered prices (9 April), UK trade data (9 April)
Tighter European supplies contrast with an easing global picture, especially in Australia. With a small crop ahead, the UK needs to stay at import parity.
Despite trimmed Argentine estimates global soyabean production remains high, with another large US area planned. Coronavirus continues to cast doubt on veg oil demand.
Global oilseed markets
Global oilseed futures
Chicago soyabean May-20 futures fell $10/t last week (Fri-Fri) on worries about the impact of the coronavirus on the global and US economies. US jobless figures soared again last week, and the Trump administration extended emergency measures until end-April.
It was also a volatile week for Malaysian palm oil futures. In the first half of the week prices gained as some plantations in Malaysia closed to try to control spread of coronavirus as we covered here. However, the nearby contract ended the week down 7% after a number of key importers of palm oil, including India, imposed lockdowns as the coronavirus spreads. These measures are likely to reduce demand.
Read more about how the coronavirus outbreak could affect the oilseeds market in an Analyst’s Insight from Alex and Anthony, out last week.
The below supply and demand information was also released last week. However, any price reaction was lost amongst the imminent concerns over the impact of the coronavirus pandemic.
- US farmers intend to plant 10% more acres to soyabean than in 2019, when flooding and water logging reduced the area planted. However, as Peter describes, the 2020 area would still be smaller than both 2017 and 2018.
- 2019/20 Argentinian soyabean crop estimate was cut by 2.5Mt by the Buenos Aries Grain Exchange to 49.5Mt, due to the effects of earlier dry weather in the Pampas area.
- Australian canola (rapeseed) production is predicted to rebound to 3.1Mt in 2020/21, after drought reduced the 2019/20 crop to 2.3Mt (US attache).
It will be interesting to see how the market reacts to the next global supply and demand forecasts from the USDA, out Thursday (9 April) at 5pm. Also out this week are Argentine crop estimates from the Rosario Grain Exchange (8 April) and Brazilian crop estimates from Conab (9 April).
UK delivered oilseed prices
Despite a drop in global oilseed prices, UK delivered rapeseed prices (May-20, Erith) were reported at £322.50/t on Friday, down just £0.50/t from a week earlier. The UK market remains quiet, with limited quantities remaining on farm after the small 2019 crop, and with farmers prioritising fieldwork.
Paris rapeseed futures prices rose early last week on concerns about palm oil supplies (see above) and then continued to gain later in the week as the euro devalued against the US dollar. However, for the UK, these gains were largely offset by a slight recovery in the value of sterling against the euro.
At the end of March, approximately 37% of the winter oilseed rape crop was rated as either in “poor” or “very poor” condition in the latest UK crop development report. This is sharply up from the 17% reported in March 2019. While disease pressure over winter was low, it is increasingly evident which plants have been stunted from pest and waterlogging damage as crops grow.