Monday, 7 June 2021
This week's view of grain and oilseed markets, including a summary of both UK and global activity.
Planting and Variety Survey
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Paris rapeseed futures (Nov-21) closed Friday at €531.00/t, gaining €18.25/t across the week. Delivered rapeseed (into Erith, Nov-21) shadowed these gains and was quoted at £467.50/t on Friday, gaining £18.50/t from 27 May.
Currency differences didn’t alter conversions much as sterling only marginally weakened (-0.02%) against the euro across the week to close Friday at £1 = €1.1636.
Canadian canola futures (Nov-21) closed Friday at CA$763.60/t, gaining CA$49.40/t across the week, closing at a new contract high. Support has been drawn from a heatwave in the Canadian Prairies and the rise in the greater oilseed complex.
Global grain markets
Global grain futures
Developing hot, dry conditions for parts of the US weigh on yield potential for the emerging crop. However, price gains for the UK are currently somewhat limited by favourable conditions for the EU and UK wheat crops.
IHS Markit lead the line in estimating the Brazilian maize crop lower at 88Mt. Estimates from other organisations are slightly less bullish, expecting 90Mt plus. Global maize supply looks to be tight for new-crop, though hinges on Chinese demand.
New-crop UK barley prices beat gains in wheat markets this past week. But, looking forward, barley prices will be influenced by prices for other feed grains, particularly maize.
New-crop wheat futures strengthened slightly last week. Values are showing some signs of recovery signs after they fell away during May. Hot and dry weather across parts of the US Midwest is the main supporting factor for grains futures contracts at present. But, European conditions are favourable for crop growth, somewhat limiting price gains.
Current expectations of a poor Brazilian Safrinha maize crop will tighten global maize supply. This could be a bullish point for grain markets – it depends on what crop size is already priced in. In May the Brazilian firm Conab estimated the total Brazilian maize output at 106.4Mt. Its next forecast is due on Thursday with large cuts expected. A forecast released last week by consultancy firm IHS Markit puts total maize output at 88Mt.
US managed money funds reduced their short positions in US maize futures last week as a bout of dryness develops across the US Midwest. This signals expectations of the continued presence of supporting factors in maize markets. In recent weeks, funds had reduced their long (bullish) positions as planting progressed unhindered.
Concerns are beginning to deepen for the emerging US spring wheat crop. A sustained lack of rainfall in producing states has hit condition scores, with 43% of the crop rated good to excellent in w/e 30 May. The score was 80% at this point last year.
The Nov-21 UK wheat futures contract gained 1.8% Friday-Friday tracking global factors. The contract was worth £177.10/t at Friday’s close, up £3.10/t. The contract has shown signs of continued recovery since hitting a one month-low of £170.50/t on 26 May.
Grain prices increased last week for both old and new crop delivery. Wheat delivered into East Anglia for November was quoted at £198.50/t for Group 1 milling and £177.50/t for feed quality. Delivered barley into East Anglia for November was quoted at £161.00/t, up £3.50/t on the week.
Global oilseed markets
Global oilseed futures
Rapeseed markets are expected to be tight going into the 2021/22 marketing year as the EU again requires large imports from third countries. Also, rapeseed values will be reactive to changes in soyabean prices and the recent support in crude oil markets.
Driving support currently is the dry weather in the U.S. Midwest, which could potentially have yield implications. Looking forward, the USDA forecast China to import 103Mt of soyabeans in 2021/22, up 3Mt from 2020/21.
UK delivered oilseed prices
Weather continues to drive oilseed markets and Chicago soyabeans (Nov-21) has now had two weeks of gains. The market closed Friday at $527.40/t, gaining $23.05/t across the week.
What is driving this is the dry weather in parts of the U.S. Midwest. This is causing concern for newly planted soyabean crops as yield potential could be compromised. However, it is still early in the growing season and weather in the month of August will be critical to yields. August is when soyabean crops start to flower in the U.S.
The market is sensitive to this information, especially as there are currently tight global supplies, due to large demand. General Administration of Customs data shows that China imported 9.61Mt of soyabeans in May, up 29% from the 7.45Mt imported in April.
Furthermore, Brent crude oil futures (nearby) closed Friday at $71.89/barrel, up 3.25% across the week. This is the first time this contract has broken above $70/barrel since April 2019. The support in crude oil prices will likely support the greater oilseed complex, as blending mandates are fulfilled.
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