Monday, 7 October 2019
This week's view of grain and oilseed markets, including a summary of both UK and global activity.
While UK, European and Black Sea wheat supply is ample, outlooks for Southern Hemisphere production have been reducing the size of the forecast global surplus.
Mixed prospects for global maize production are providing support to markets. Bullish factors include poor yield prospects for French maize, delayed US harvest, and ongoing South American dryness during planting.
Owing to what is potentially the largest domestic barley crop in recent years with an export requirement, while wheat and maize markets are finding support, domestic barley may fail to record comparable gains.
Global grain markets
Global grain futures
Old crop stocks of US maize proved to be significantly below trade expectations and previous estimates made by the USDA WASDE, providing support to markets.
Additionally, delays to the US wheat and maize crop continued. The harvest of US spring wheat had progressed just 3% by 29 September from the previous week. With the US wheat harvest having been complete over two weeks ago this time last year, there remains 10% left still to cut. The Canadian harvest is also behind average, with just 47% of crops harvested in the Saskatchewan region, 28 percentage points behind average.
Much of the Southern Hemisphere has also remained dry, impacting production prospects for wheat and maize production in 2019/20.
A combination of smaller than expected old crop stocks, delayed crop development and reduced Southern Hemisphere production outlooks have reduced the size of the grain surplus in 2019/20 allowing a less bearish global outlook.
Although globally there are supportive factors for wheat and maize markets, UK feed wheat futures recorded a loss on the week from Friday 27 September to Friday 4 October.
Reduced domestic consumption figures and a requirement to gain new export sales have continued to pressure domestic markets. The discount of UK feed wheat futures to Paris wheat futures has now widened to just under €22/t from an average of €19/t throughout September.
With little concrete news regarding a deal with the EU, the potential disruption in the event of a no-deal may well have started to be somewhat priced in.
Globally the outlook for rapeseed remains tight for 2019/20. EU is forecast to see record imports due to shortfalls. Questions remain over Canadian and Australian production.
US soyabean stocks turned out lower than expected. Dry weather has hampered initial plantings in South America. Demand remains uncertain as the US China trade talks rumble on in the background.
Global oilseed markets
Global oilseed futures
Chicago soyabean futures closed the week at $336.63 (Nov-19), up $12.22/t on the back of a lower than expected USDA soyabean stocks release. This release saw funds slash their net short position in Chicago soyabeans to only 2%, the lowest since April. All eyes are now on this Thursday’s WASDE release, as initial yield reports from the US are coming in below average.
The US and China are set to meet again this week to discuss the ongoing trade dispute. While there are reports of US soyabeans being purchased by China ahead of the trade talks, so far the actual volumes remain below average.
Soyabean plantings in Brazil are being hampered by dry weather with 6.7% of the crop currently in the ground, compared to 12.6% last season. There still is time to get the crop in the ground before yields become impacted but it may be an issue moving forward.
UK delivered oilseed prices
Paris rapeseed futures traded in a narrow band last week, closing at €386.00/t on Friday. Domestically UK prices were unchanged on the week at £346.50/t (Erith, Nov-19). Domestic trade was said to be quiet with sellers focusing on fieldwork and crushers using imported supplies.
Freight rates from Odessa to Rotterdam fell by $2.40/t (Mon-Fri). Increasing the competitiveness of Black Sea origin rapeseed and limiting any potential upward movement in European prices.
The EU outlook continues to tighten with the latest Strategie grains release lowering production to 16.9Mt (-0.1Mt from last release). Globally the outlook remains tight with Canadian harvest progress hampered by adverse weather and dryness in Australia set to cap production.