Monday, 13 January 2020
This week's view of grain and oilseed markets, including a summary of both UK and global activity.
The planted area for US winter wheat is the smallest since 1910 at just 12,466Kha, providing additional support for global wheat markets.
Further tightening and support for maize. December US stocks are down 5% year on year at 289Mt with an increase in feed demand tightening supplies.
The domestic discount of barley to feed wheat has continued to widen, with barley prices failing to follow wheat prices upward.
Global grain markets
Global grain futures
A flurry of anticipated generally supportive US crop data was released on Friday:
Support for US wheat came from the latest USDA WASDE, which detailied an increase in 2019/20 domestic feed usage resulting in ending stocks forecast at the smallest in 5 years. Confirmation that the US winter wheat area for 2020 has declined again provides further long-term support for Chicago wheat markets. At just 12,466kha, the US winter wheat area for harvest 2020 could be the smallest area since 1910.
Although there was an expectation that maize production numbers would be revised downward, this failed to be the case. Yet with 8% of the crop unharvested by December 8, the final production number remains questionable. Although there was no cuts to production, a 6Mt increase in feed demand tightened expected US ending stocks and reduced the export forecast.
December stock data showed a 5% year on year reduction in US maize stocks at 289Mt. Confirmation of tighter December stocks provides support to US maize futures, counteracting previously bearish minimal export data for the 2019/20 season.
UK feed wheat futures continued to find support last week. May-20 UK closed on Friday at £153.60/t, up £0.85/t on the week maintaining a discount of between €8/t - €10/t to May-20 Paris milling wheat futures. Gains in global markets have been the predominant driver behind the rise in domestic markets.
November export data, to be released this week will point toward potential changes in this price relationship, with large current season supplies to potentially weigh on domestic markets.
New-crop (Nov-20) feed wheat futures also closed up marginally over the week, recovering from falls on Friday 3 and Monday 6 as global markets found support.
Rapeseed prices have seen rises following strong European demand as Ukraine imports withdraw from the market. UK prices are becoming increasingly attractive for sellers but some risks are explained below.
The bullish sentiment in markets continues in anticipation of the US-China ‘phase-one’ deal signing scheduled this week. US soyabean prices must remain competitive with their South American counterparts to attract Chinese demand.
Global oilseed markets
Global oilseed futures
This week, the US-China trade deal is scheduled to be signed, the result of almost two years of negotiations. Whilst this does not translate to a complete deal, it signifies Chinese intentions to purchase large volumes of US soyabeans once again.
On Friday, final production figures were released for the US soyabean crop, with figures above market expectations. Production figures increased 0.22Mt from December’s release to be at 96.84Mt. This is a 23.68Mt decline from last year. The USDA have said they will be resurveying the five northern states where large acreages of crops remain unharvested.
US hedge funds remain neutral towards CBOT soyabeans as at Tuesday 7 after sharply reducing short position in December. Reports suggest funds continue to hold long positions in soyabean oil futures.
India, has effectively ceased purchases of Malaysian palm oil following a diplomatic fallout. Indonesian palm oil prices have risen as a result, but the impact on EU markets is lessened.
UK delivered oilseed prices
Paris rapeseed futures have risen for the 7th consecutive week, following gains in vegetable oil markets over that period. The Feb-20 contract increased €5.50 over the week to be at €420/t at 10 am this morning.
Conditions in Black Sea regions remain relatively warm for this time of year, a lack of rainfall has left soil moistures dry. The area of spring rapeseed that is to be drilled will be an important watch point as the rapeseed picture seems increasingly tighter.
However, soyabean oil prices have tracked lower in Euro terms over the last month. This highlights a risk to rapeseed demand if mild weather continues and allows for more soyabean oil inclusion in biodiesel production.