Tuesday, 14 April 2020
This week's view of grain and oilseed markets, including a summary of both UK and global activity.
Old crop wheat has been heavily pressured by Thursday’s WASDE. Whilst there are still forecasts of increased global supplies in 2020/21, dry conditions in the Black Sea are driving the short-term sentiment for wheat
Both old and new crop maize supplies are plentiful. Poor ethanol demand continues to add pressure to prices, in spite of cuts to OPEC+ production.
Large supplies of barley both domestically and globally are pressuring physical prices and maintaining a strong discount of barley to wheat.
Global grain markets
Global grain futures
Grain markets have lost significant ground as a result of Thursday’s USDA Supply and Demand estimates. UK feed wheat futures were down $4.05/t at 2pm today. The move lower has been driven by the increase in ending stocks for both wheat and maize.
The shift higher in wheat ending stocks was primarily driven by reduced consumption in China and India, two major importers the move higher in maize stocks was a result of a 5.2Mt cut to US consumption, with the US vastly reducing it’s ethanol demand.
Last week’s meeting of the OPEC+ nations saw a record cut to production agreed. However, the economic uncertainty surrounding coronavirus continues to erode support for oil, and as such maize.
Global wheat markets were supported to Thursday’s close, but have subsequently fallen back today. Support has been seen from ongoing weather concerns for global wheat crops. This is most notably seen in the Black Sea region, where both Russia and Ukraine are experiencing some significant moisture deficits. While there is rain forecast for the Black Sea region, the situation will be watched closely.
UK feed wheat futures (May-20) ended the week stronger, up £2.70/t, Friday-to-Thursday. Despite the strength of wheat futures, milling markets have come under some pressure. The premium of UK delivered milling wheat over UK feed wheat futures (North-West, May-20) fell £1.60/t, quoted at £36.20/t, down from £37.80/t the previous week. The milling market may have overstretched itself slightly on recent coronavirus led demand, particularly with food service demand now lacking.
Following months of wet weather, talk in the trade has now centred on how dry the UK has become in some regions. With a smaller UK wheat area this season and 18% of the crop in either “poor” or “very poor” condition at the end of March, weather between now and harvest will be very important to market sentiment
Gains in Paris rapeseed futures on the back of rising crude prices and Black Sea dryness have provided support , although matched by the continued strengthening of sterling.
Soyabeans are facing increased pressure amid low oil prices. Furthermore, soyameal comes under pressure as meat packers in the US face the prospect of closure and consumption slows.
Global oilseed markets
Global oilseed futures
Following a marginal recovery in crude oil at the beginning of the week, Brent crude has continued to slide once more as global consumption cuts outweigh prospects for reduced outputs by OPEC and Russia. Nearby Brent crude closed yesterday (13 April) at $31.74/bbl, down from $34.11/bbl on 3 April.
US Chicago soyabeans are facing increased pressure amid low oil prices. Furthermore, soyameal comes under pressure as meat packers in the US face the prospect of closure and consumption slows. Falling $49.60/t since 23 March, nearby US Chicago soyameal closed at $318.13/t yesterday, undoing the previous gains in March. This has been driven by the prospects of reduced crushing amid falling oil demand.
Adding further pressure to US soyabeans have been minimal export sales. Just 362Kt was exported in the week ending 4 April, the lowest weekly volume this marketing season. This leaves over 16Mt to still be exported, in competition with South America.
Harvest in South America is ongoing, with Argentina now over 16% complete. Good yields are reported in the northern region by the Buenos Aires Grain Exchange. Production estimates in Brazil have been curbed, Conab lowering their estimate by 2.1Mt to 122Mt. While production cuts would provide support to the oilseed complex, possible falls in global consumption have outweighed the cuts.
UK delivered oilseed prices
The gains in Brent crude at the start of April leant support to May-20 Paris rapeseed futures, which closed at €371.75/t on Thursday after gaining €36.25/t on 16 March.
Yet with crude oil prices falling away, this support may well fade. Also, the additional support provided through dry conditions in the Black Sea may diminish with forecasts for precipitation.
While Paris rapeseed futures have gained, the increasing value of the pound relative to the euro has prevented this movement translating into domestic markets. Delivered oilseed prices to Erith for May delivery have gained just £1.50 since 27 March, at 324.50/t, on Thursday.