Monday, 13 July 2020
This week's view of grain and oilseed markets, including a summary of both UK and global activity.
With production estimates down for EU and Russia, global supply is looking tighter. Stocks are still estimated to rise considerably year-on-year with large southern hemisphere crops helping fill market demand.
Demand for ethanol appears to be on a fluctuating road to recovery, which may help support demand for maize. There is still a long way to go to reach pre-coronavirus levels though.
Some reports of low barley yields on the continent so far, although quality has been good. Significant global crop is still anticipated, with large spring planted area looking to keep the market well supplied.
Global grain markets
Global grain futures
The USDA’s latest supply and demand (WASDE) report suggests a reduction in global wheat supply for 2020/21, driven by reduced wheat production in the EU, US and Russia. The US’s lower production figure is counterbalanced by large opening stocks.
EU (including UK) wheat production alone is expected to be at its lowest level since 2012/13. Russia’s increased spring wheat area has helped to slightly offset the reduction in winter wheat plantings. However, overall the WASDE report still suggests Russia’s wheat crop to be 0.5Mt lower year-on-year. Australia continues to be bucking the general trend with favourable weather conditions helping to boost their domestic wheat production.
Furthermore, Russian Agri-consultants IKAR have lowered their Russian wheat crop estimate to 76.5Mt, from 78Mt.
The USDA figures suggest significant cuts to US maize production and stocks, with USDA estimates now at 381Mt a cut of 25.3Mt for 2020/21. Despite the sharp cut to production, global maize stocks look comparatively plentiful. US ethanol production continued to increase during July, while ethanol stocks showed a weekly increase for the first time since late April.
During the last week, UK grain prices have continued to follow the global markets. UK delivered markets showed feed barley (delivered East Anglia, Harvest) prices to be up on the previous week to around £132.00/t. UK delivered feed wheat prices have also generally seen a week-on-week increase.
Last week we released the Planting and Variety Survey estimates for 2020 harvest. These showed a 25% drop in the GB wheat area year-on-year. For more detail on these estimates, you can listen to our latest podcast here.
Winter barley is beginning to be harvested in various areas of the UK. It is likely to be a few weeks yet before harvest gets in full swing with many crops being planted in the spring. AHDB is monitoring the harvest with our contractors and will begin reporting in the next few weeks once sufficient volume has been cut.
The price picture for rapeseed remains somewhat uncertain going forward. The market is tighter year-on-year and prices are elevated however, Paris futures (Nov-20) have struggled to sustain a level above €380.00/t.
The USDA tightened its outlook of global soyabean supply and demand in the latest WASDE, but a lot will ride on US crop development between now and harvest.
Global oilseed markets
Global oilseed futures
Soyabean markets have seen both sides of the coin in the last two weeks. A strong uptick following the USDA planted area release on 30 June, was followed by neutral USDA supply and demand estimates (WASDE) on Friday and improved weather conditions.
The WASDE points to a slightly tighter season in 2020/21 than previously forecast, driven by smaller opening stocks particularly in Argentina and Brazil. Crop production was up very marginally from last month’s report on a global level. Global ending stocks of soyabeans are seen at 95.1Mt in 2020/21, down 4.6Mt on the year and 1.3Mt on the USDA’s June estimate.
The decline in global ending stocks was broadly in line with trade estimates, in a pre-report poll by Reuters.
Further pressure for soyabean markets is seen this week, with improved weather conditions in key US states. The recent trend for hotter, drier weather is easing marginally in the Northern States.
UK delivered oilseed prices
Paris rapeseed futures saw a significant increase Friday-to-Friday last week. Despite falls at the end of the week new crop (Nov-20) Paris rapeseed futures closed up €3.50/t on the week, at €382.00/t.
Friday’s WASDE cut world oilseed rape production by 970Kt. The cuts were primarily for Canada, where 2020/21 output is now seen at 19.0Mt, flat year-on-year. Because of the cut to production, Canadian ending stocks in 2020/21 are seen falling to 2.7Mt, from the previous forecast of 3.6Mt.
UK delivered rapeseed values gained strength last week in a thin market. November UK rapeseed, delivered Liverpool, was quoted on Friday at £348.00/t, up £2.00/t, week-on-week. Strength in sterling stopped the full extent of EU gains from happening in the domestic market.
Last week we released the Planting and Variety Survey results, showing the England and Scotland rapeseed area down a combined 26% year-on-year. Questions remain around the yield potential of the crop. In May’s crop report, 41% of total winter OSR is rated either ‘very poor’ (15%) or ‘poor’ (26%) meaning high, or extreme risk of yield loss.