Monday, 9 December 2019
This week's view of grain and oilseed markets, including a summary of both UK and global activity.
Minimal US exports and improving new crop conditions have pressured global markets, outweighing support from further downgrades to production in Australia and Argentina.
Increased production estimates for the EU, coupled with keen sales in Argentina and Ukraine have led maize markets to continue to slide.
The prospect for an area increase in 2020, not just in the UK but also France, will likely continue to pressure prices with a large price discount to feed wheat.
Global grain markets
Global grain futures
US corn futures (May-20) drifted again last week (Friday – Friday) to close at $150.58/t. The drift in markets comes amid an increased incentive to sell in Argentina due to the potential for export taxes under a new government.
Downgrades to Australian wheat production have provided some old crop support. The Australian agricultural organisation ABARES cut their wheat production forecast for 2019/20 to 15.9Mt from 19.1Mt in September.
Although the on paper global surplus has decreased, US wheat futures fell last week by over 3% (Friday – Friday), closing $6.25/t down by Friday 6 at $193.92/t. Bearish news came from weekly US wheat exports of just 232Kt by 28 November, the smallest weekly volumes this season. Additionally, more favourable new crop conditions, particularly in the Black Sea contributed to reversing previous market gains.
The latest USDA supply and demand estimates will be released tomorrow at 17.00
While concerns regarding new crop wheat planting have provided support to domestic markets, further gains will now require global markets to also rise.
As UK feed wheat futures are now pricing at historically high levels relative to Paris milling wheat futures (read more here), gains in the value of the pound have dented domestic prices.
From market close on Friday 29 November to Friday 6 December, the value of the pound continued to gain relative to the euro, up from £1=€1.1739 to £1=1.1871. In response to the strengthening currency and falling Paris milling wheat futures, UK feed wheat futures (May-20) closed on Friday 29 at £147.50/t, falling £3.75/t, and Nov-20 closed at £155.00/t, down £2.25/t.
Old crop continues to find support from tighter global vegetable oil markets and rapeseed supply concerns. Although gaining last week global new crop markets look well supplied, capping domestic prices.
Markets have been supported by improved export sales between the US and China. Supplies still look ample globally, Argentinian beans currently cheapest origin. Plantings in Argentina progressed well last week.
Global oilseed markets
Global oilseed futures
Oilseed markets firmed last week driven by a combination of continued tightness in palm oil and improved trade relations between China and the US.
Palm oil has been pushed higher by tight supplies in Indonesia and Malaysia. With palm supported and soy relatively pressured, Malaysian palm oil futures (nearby) have moved to their narrowest discount to Chicago soyabean oil (nearby) since February 2017.
In Argentina soyabean plantings press on, ahead of last year’s pace. The South American nation is widely expected to expand soyabean production this season in response to increased grain export taxes, levied by the country’s government.
UK delivered oilseed prices
Rapeseed markets found new support last week, nearby Paris rapeseed futures hit the highest point since April 2017, at €397.00/t. Rapeseed futures have been supported by firmer prices in rival oils (soyabean, palm and sunflower) as well as a further tightening of global rapeseed/ canola supplies in 2019/20.
Following poor conditions during harvest, Statistics Canada have revised Canadian canola production down by 0.8Mt, to 18.6Mt, the lowest level since 2015/16. With tight production in the EU and Australia, and Ukrainian exports due to dry up in the New Year, Canadian canola prices will be important to domestic market movements.
Despite firmness in old crop markets, new crop markets have been more pressured of late with increased rapeseed planting in the Black Sea region.
UK delivered price gains were limited in the past week. Stronger sterling prevented the full extent of gains in EU markets from filtering through.