Monday, 10 August 2020
This week's view of grain and oilseed markets, including a summary of both UK and global activity.
Global markets are likely to be heavily dependent on how the Russian harvest continues to develop. In the short-term demand will need watching, with a number of global tenders recently issued.
US maize prospects remain large and sizeable global supplies are still expected. However, prices are currently very weak, with Chinese demand and US ethanol demand both important watch points.
Demand remains limited for barley, especially given the increased area planted to the crop this season. Prices are likely to be dictated by wheat and maize prices, with a need to remain competitive.
Global grain markets
Global grain futures
Global wheat markets continued to track lower last week. Paris milling wheat (Dec-20) futures ended the week at €178.25/t, down €4.50/t on the week. Chicago wheat futures (Dec-20) saw greater losses, falling $12.95/t, to close on Friday at $185.00/t, cancelling all of the gains made in July.
Once again, Russian news stories were a key driver of the direction of grain markets. Recent upward area revisions have been followed by improved yield expectations from some key forecasters. SovEcon highlighted that yields are now ahead of the past two seasons. Elsewhere, Russian firm IKAR revised its wheat production estimate up by 1.5Mt to 81Mt.
Further pressure has been seen with Canada expecting a record wheat crop this year. Production is estimated at close to 39Mt, more than the current record of 37.6Mt set in 2013, according to one advisory firm in Canada.
The larger wheat harvests expected in Russia, Australia and Canada are weighing on global prices. This is moving EU and UK prices lower. French production is estimated to be down a quarter on last year to around 30 Mt, according to Reuters. Germany’s crop conditions are better and may help to offset some of this decline in production in the EU.
CBOT corn futures (nearby) closed last Friday down 2.6% on the previous week. A large US maize crop is being anticipated, while demand remains subdued. Despite this, there have been some gains for CBOT futures since markets opened this morning.
UK wheat futures (Nov-20) closed last week at £162.65/t, down £3.20/t on the previous Friday. UK delivered prices also followed the same trend and feed wheat (delivered East Anglia, Nov-20) was quoted at £167.00/t, £2.00/t lower on the week. With UK wheat availability restricted in 2020/21, physical premiums are historically firm.
With the global futures market falling back and domestic yields reduced, premiums will likely need to remain firm in order to attract farmer selling.
Sterling remained relatively stable (Friday-Friday) against both the euro and the dollar last week.
The UK wheat harvest is getting well underway in many regions across the country. The next AHDB harvest report will be published on Friday 14 August.
With rapeseed harvests continuing in the EU and UK, prices have seen some pressure. Good crop development in Canada may add pressure, however the firming of vegetable oil markets is something to watch closely.
Despite a tighter stocks-to-use picture for soyabeans in 2020/21 and large volumes of Chinese purchases of US supplies, good US crop conditions and bumper yield expectations are pressuring prices.
Global oilseed markets
Global oilseed futures
Oilseed markets retreated last week, feeling pressure from ample global supplies and good US crop conditions. The latest crop condition report for US soyabeans showed the proportion rated “good” or “excellent” was up marginally. Both conditions and crop development are well ahead of last year and the five-year average level. In response, Chicago soyabean futures (Nov-20) fell by 2.8%, Friday-Friday (31 July – 7 August).
On Friday, USDA export figures highlighted the biggest single day of soyabean sales since June 11. However, even booming Chinese purchases of US soyabeans have not been enough to overturn the bearish production sentiment. China has reportedly purchased 3Mt of soya purchases since July 10.
US managed money funds trimmed their net-long position further this week, now standing at 5.2%, a sign that the market is increasingly pricing in a larger soyabean crop.
Despite the bearish sentiment around soyabeans, there are some supportive signals for the vegetable oil complex. Nearby Malaysian palm oil prices have spiked to levels previously seen in February in recent weeks, before falling back. Stocks of the oil in Malaysia have reportedly hit a three-year low. Although the fall in stocks and production of the oil in Malaysia were down the cuts, which have been driven in part by labour shortages during the coronavirus pandemic, were not as severe as estimated in a Reuters’ poll.
UK delivered oilseed prices
Despite the rise in vegetable oil prices, rapeseed prices have been in decline over the past week. The Nov-20 Paris rapeseed contract lost €4.50/t, Friday to Friday, closing at €377.25/t. Rapeseed futures have traded within a comparatively narrow range through July and into August.
Despite tight supplies of rapeseed forecast in the EU, globally there are expectations of good crop availability in Canada and Australia. Canadian crop conditions in all major producing regions were similar to average/above average in the week ending 2 August. The area planted to canola for harvest in 2020 is down year-on-year in the wake of the ongoing China-Canada trade dispute.