Monday, 10 February 2020
This week's view of grain and oilseed markets, including a summary of both UK and global activity.
With the market lacking any significant shift in fundamentals, weakness of both sterling and the euro against the dollar has provided recent support to UK and European wheat futures.
A quiet market waiting on changes to fundamentals in South America. Delayed planting of the safrinha crop in Brazil may curb maize production, although there is still a while before this is truly known.
Domestic barley prices remain at a significant discount to wheat prices in order to find demand. With forecasts for an increased spring area in 2020/21, this discount is likely to continue.
Global grain markets
Global grain futures
Following the global commodity fall of recent weeks, on the potential agricultural impact of the coronavirus, both corn and wheat Chicago futures markets mostly tracked sideways last week. The lack of direction comes ahead of both the February USDA supply and demand estimates (WASDE) and US crop production data, to be released tomorrow.
Amid coronavirus fears, US export data will be key to US market drivers. Yet with 5 months of US maize exports gone, only 11.1Mt has been exported out of a forecast 45.1Mt which may keep the market relatively suppressed.
That said, delays in planting the safrinha (second) maize crop in Brazil amid the delayed soyabean harvest could offer prices some support. The delayed soybean harvest reportedly may push planting of the safrinha crop close to the end of the maize planting window.
Gains have been recorded in Paris milling wheat futures, driven by a fall in the value of the euro relative to the dollar. The US dollar has received support as the US economy is seen as resilient to coronavirus this view has been reinforced by positive economic data.
Although global markets have somewhat tracked sideways, domestic wheat markets have recorded modest gains.
A slight weakening in sterling amid Brexit negotiations also provided support to domestic grain markets. The perception of how Brexit negotiations are going will have a large impact on currency markets throughout this year.
While new crop wheat markets are pricing toward import parity, and support has been provided to old crop markets, barley has remained under pressure throughout this season. Additionally, with a possibility for a larger spring barley area, there is likely to remain a large discount to wheat. The second release of the AHDB Early Bird Survey later this month will provide greater clarity for the UK cropping area for harvest 2020.
Domestic prices saw increases this week as the pound weakened against the euro. However, rapeseed markets remain relatively pressured from demand concerns in global oil markets.
Soyabean markets recovered from recent losses last week, but demand remains affected by the coronavirus outbreak. The USDA supply and demand estimates are released tomorrow and will be watched closely.
Global oilseed markets
Global oilseed futures
Chicago soyabean futures (Nearby) closed on Friday at $324.05, up $3.49/t on the week. Markets were buoyed by the announcement that China will still meet its trade deal purchasing targets despite coronavirus concerns.
Oilseed markets benefited from mid-week optimism in crude oil markets. Last week, Brent crude oil futures hovered around the $54 - $55/bbl mark, as declines were stemmed by reports suggesting global crude oil production cuts in lieu of reduced demand from China.
Malaysian palm oil markets (Nearby) rebounded 9.96% last week, with Malaysian supply and demand figures estimating palm oil inventories at their lowest since June 2017. However, with Malaysian export figures still affected by India’s ban on Malaysian palm oil shipments, prices could yet see further declines.
The Brazilian soyabean harvest pace remains slow due to wet weather, and is at 9% completed, below the five year average by 0.8%. The country is expected to harvest a record soyabean crop this year. So far this harvest, yields have been better than this time last year.
UK delivered oilseed prices
Paris rapeseed futures (May-20) closed on Friday at €392.25/t, down €0.25/t on Friday 31 January. With a large deficit of rapeseed in the EU this season, imports of rapeseed continue from Canadian and Baltic origins. As of 02 Feb, 4.04Mt of the 6.0Mt import requirement has been imported.
Last week, UK delivered rapeseed (Erith, Feb-20) rose £2.50/t on the week previous, quoted at £336.00/t. The rise is in part due to a weaker sterling. Its value against the Euro fell 1.08% over the week, closing on Friday at £1 = €1.177. The domestic market is generally lacking engagement at present.