Market Report - 07 September 2020

Monday, 7 September 2020

This week's view of grain and oilseed markets, including a summary of both UK and global activity.

Grains

Wheat

Maize

Barley

UK wheat prices are still strong, but the rate of growth has slowed versus the previous week. Globally, large stocks are still expected with Russian production estimates rising.

A large global maize crop is still anticipated, however crop conditions in the US have been reducing, which combined with strong US exports is helping to support prices.

The outlook for UK barley prices is still fairly bearish. In East Anglia, delivered feed barley (spot) had a discount to feed wheat of £40.50/t as at 3 September.

Global grain markets

Global grain futures

After an extended steady period of growth, gains in both CBOT wheat futures (Dec-20) and MATIF wheat futures (Dec-20) have begun to ease, with markets closing at $202.18/t and €188.25/t on Friday respectively.

Argentina’s crop conditions have been improving despite bad droughts and the risk of La Niña in recent weeks. Rainfall has now offered some much needed support and should help crops to recover slightly.

The Russian 2020 wheat crop estimate was increased on Friday, SovEcon has lifted its production estimate to 82.6Mt, an increase of 1.4Mt on their previous estimate, according to Reuters. With this in mind, many of the major wheat exporting nations such as Russia, Canada, Australia and Ukraine are now anticipating large supply levels, which will put pressure on the current high global markets.

Global maize markets are still being controlled by price changes in the US. Chicago maize futures (Dec-20) are still being driven by uncertainty surrounding the impact of severe weather on the U.S maize crop. The USDA will release its latest crop production this Friday and the results of this are likely to influence market positions.

UK focus

Delivered cereals

UK feed wheat futures (Nov-20) continue to test the £170/t mark. Prices have been following this same upward trend for several weeks now, although growth has begun to stagnate slightly as prices struggle to break this barrier.

The UK wheat price is still likely to be dictated by other global market trends, and with both Chicago and Paris futures declining in recent days, further growth in the UK wheat futures price may be limited. However, price rises in Ukrainian export markets may be a factor helping drive domestic prices upwards and offset this slightly.

Brexit negotiations are becoming more volatile and the chances of a deal being reached is considered by Reuter’s to be falling. In the event of a no deal scenario, low and medium grades of wheat (exc. durum wheat) imported to the UK would be faced with a £79.00/t. This will likely result in a front-loading of wheat imports into the UK pre-December 31.


Oilseeds

Oilseed Rape

Soyabeans

Rapeseed values appear to be maintaining their present premium over the oilseeds market. Stratégie grains have revised up their estimate for EU production although EU prices will still be dictated heavily by imported oilseeds.

Whilst the global picture for soyabeans is one that is better supplied year-on-year (IGC and UN FAO), present concerns over US conditions and strong export demand from China is supporting values.

Global oilseed markets

Global oilseed futures

Rapeseed values appear to be maintaining their present premium over the oilseeds market. Stratégie grains have revised up their estimate for EU production although EU prices will still be dictated heavily by imported oilseeds.

Once again soyabeans dominate the picture for the oilseed market. The recent rally in Nov-20 Chicago soyabean futures extended further on Friday, closing at $355.68/t The current uptrend has now been seen for the past 9 days, with the Nov-20 contract gaining $22.87/t (up 6.87%) in that time.

Soybeans are seemingly driven by three factors at present, a strong US export campaign, concerns over US crop conditions and a weaker dollar. While the US dollar index did recover slightly towards the end of the week, it still remains at historically low levels, prompting increased interest in US exports.

US exports of soyabeans have been rampant of late. In the week ending 27 August 1.76Mt of soyabeans were booked for the new marketing year, 1.0Mt of which are destined for China. Outstanding sales of soyabeans for the new marketing year now stand at 24.19Mt, comfortably ahead of the same level in each of the past five seasons.

US soyabean crop conditions declined in last week’s report, meanwhile conditions in the US Midwest remain significantly drier than normal. This may well impact crop conditions in the next USDA crop report due tomorrow night.

Further forward we need to consider the planting campaign due to commence soon (October/November) in South America. Argentina remains dry although the outlook for the north of the country has improved. Meanwhile Brazil looks drier than normal.

Rapeseed focus

UK delivered oilseed prices

Movements in rapeseed markets have not necessarily followed the trend in wider oilseed markets. Nov-20 rapeseed futures have gained just 1.25% over the past 9 days, closing on Friday at €384.50/t.  Friday to Friday, Paris rapeseed futures we up €2.25/t. This move was not translated into domestic physical prices, with rapeseed delivered into Liverpool (November) unchanged on the week at £349.00/t.

Oils continue to be a driving force behind the oilseed complex, and vegetable oil values have moved significantly higher in recent weeks.

With tight EU supplies of rapeseed this season, imports will be pivotal to future price direction. Australian weather is shaping up positively and a large crop is expected. That said, with rapeseed supplies globally restricted, other crops including soyabeans will be very important this season.



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