Monday, 11 November 2019
This week's view of grain and oilseed markets, including a summary of both UK and global activity.
Global wheat supply remains plentiful for 2019/20 with minimal change in the WASDE forecast. Australian and Argentinian production was unsurprisingly downgraded (-1.3Mt combined) but offset by increased production from EU and Black Sea.
The WASDE showed global maize production down 1.85Mt. Markets still remain relatively well supplied for 2019/20 and US fund positions extended their short position last week.
A well supplied domestic barley market will continue to keep prices pressured. There was some uptick in delivered prices last week on the back of a rise in wheat prices.
Global grain markets
Global grain futures
Global grain markets were awaiting the USDA world agricultural supply and demand estimates (WASDE), released on Friday. Global grain supply saw little change overall. Global wheat production estimate is slightly larger at 765.55Mt, up 0.32Mt from the last report.
Although Argentinian and Australian production forecasts were lowered (unsurprisingly), it was more than offset by a rise in production forecast for Russia, EU and Ukraine of 2.8Mt combined.
Maize supply was also relatively unchanged with a 3Mt drop in US production offset by lower US demand leaving ending stocks down just 0.46Mt. Global maize production is estimated down by 1.85Mt at 1,102.2Mt.
Old-crop US maize and wheat futures (Dec-19 and May-20) fell over the week and have recorded further losses this morning. Regardless of a drop in corn production the global outlook is still well supplied.
UK feed wheat futures (May-20) gained £5.05/t on the week, to close Friday at £151.25/t. Both old-crop and new-crop futures have seen some support from the delayed planting of winter wheat. This delay means the prospect of a tight 2020/21 season and a return to a net importer could be on the cards. Due to the prospect for a return to deficit, new crop futures markets are pricing at import parity (read more here).
As this has supported new-crop futures the carry into next season has extended. The carry from May-20 to Nov-20 has extended from £2.60/t at the beginning of October, to £7.75/t on Friday (8 November). This gives incentive to store grain and carry it into the next season.
With incentive to carry supply through to 2020/21 the effective exportable surplus for this season has diminished and lent some support to old crop markets.
However, this supply and demand picture could still change depending on the volume of carry over stock, and the actual impact of delayed planting.
Supplies remain tight with questions over where the EU will source imports from later in the season. Domestic new crop rapeseed is facing difficulties with establishment setting up for another tight year.
The WASDE release showed minimal changes for soyabeans with decreases in production offset by reduced consumption. For Argentina there is still a question over export taxes and soyabean areas ahead of the new President assuming office in December.
Global oilseed markets
Global oilseed futures
This month’s WASDE was a nonstarter with limited change for oilseed production. Soyabeans showing a slight downward revision with 2019/20 global soyabean production tightening to 336.56Mt, down 2.41Mt from October’s release.
This was counteracted by a dip in usage which saw ending stocks revised upwards to 95.42Mt (+0.21Mt). Total oilseed production and ending stocks followed suit at 571.30Mt (-3.55Mt) and 109.99Mt (+0.24Mt) respectively.
A Malaysian Palm Oil Board data release earlier today tightened October production and stocks, contrary to trade expectations. Estimated stocks stood at 2.3Mt, down 4.1% from September. The trade was expecting an accumulation in stocks to 2.5Mt, up 2.8% from September, according to a Reuters Poll.
Earlier today palm oil futures (nearby) hit its highest value since March 2018, up 21% since the start of October. With strong demand from importers and increased domestic usage in South East Asia palm oil markets are looking to be supportive of rapeseed moving forward.
UK delivered oilseed prices
Last week, UK delivered rapeseed (Erith, Nov) was quoted at £336.50/t, up £5.00/t on the week on the back of gains in Paris rapeseed. There remains uncertainty over how the EU will source rapeseed once exports from the Black Sea wind down. We are likely to see an increase in imports of biodiesel and substitution where possible to cope with this deficit (read more here).
Domestically the heavy rain and damage from cabbage stem flea beetle has not been kind to the rapeseed crop now in the ground. Given the difficulties last season it is unlikely that we would see a significant area increase to offset this damage.