Monday, 15 June 2020
This week's view of grain and oilseed markets, including a summary of both UK and global activity.
Concerns remain about European and Ukrainian crops and the impact of recent rainfall. However, renewed confidence from SovEcon in Russian production coupled with the US harvest progressing at pace could cap any gains.
Crude oil prices stalled last week and USDA reduced its forecast for ethanol usage but by less than some industry analysts were expecting. Global production still looks set to be high, but we’re now approaching a key period for US maize crops development so weather is likely to be a key factor.
Potential for a rebound in Australian production, along with timely European rain, against a backdrop of uncertain demand has stalled barley price increases.
Global grain markets
Global grain futures
Wheat markets fell last week after the USDA raised both its 2019/20 and 2020/21 global wheat end season stock forecast, despite cutting EU and Ukrainian production. The prospect of heavier Russian supplies also weighed on markets as SovEcon increased its estimate of the Russian wheat crop by 1.5Mt to 82.7Mt following rain in May.
On Thursday, Chicago wheat (Dec-20) futures reached a three week low, while Paris wheat futures (Dec-20) hit the lowest level since 18 March. Prices picked up a little bit on Friday following technical trading but still ended the week lower. Maize prices were also down Friday-Friday.
Dry weather in Argentina is casting doubt on what was expected to be a record wheat area. However, the impact on global markets has been minimised by a 76% year on year forecast increase in Australian production as these crops reach market at similar times. Australian wheat production is predicted to hit an eight-year high by the Australian government as farmers expand their areas after good rains after several years of drought. Austraian barley crop production is also expected to be up 17% from 2019/20.
Stratégie Grains reduced its EU27 + UK wheat crop estimate by 2.0Mt arguing that the recent rains had arrived too late for wheat in many areas. At 130.9Mt, the crop would be 11% smaller than last year. The company increased barley production by 1.0Mt due to a positive outlook in Spain, and the crop is now set to be 1.0 Mt larger than last year.
UK feed wheat futures (Nov-20) fell to a three week low of £167.00/t on Thursday but recovered some of the lost ground on Friday, following the global trend. The contract ended the week at £168.00/t, down £2.00/t from Friday 5 June.
In the delivered market, new crop prices declined broadly in line with UK futures amid thin trade. However, old crop prices declined by less, depending on local demand. In some areas old crop bread wheat values even recorded some support Thursday-Thursday. Prices for June/July delivery are now at similar levels to those for harvest delivery for both feed and bread wheat, so this trend seems unlikely to continue, unless harvest is disrupted.
Increases to Australian rapeseed production estimates will help the EU rapeseed import requirement next season. In the first estimate for the upcoming French rapeseed harvest, France’s agricultural ministry forecast their crop at 3.46Mt, a rise of 0.1% from last year.
A second strong week of US soyabean exports has supported hopes China will continue its large volume purchases of US origin throughout the year. Markets await the release of US monthly soyabean crush figures later today; pre-release polls predict a new crush record for May.
Global oilseed markets
Global oilseed futures
US soyabean futures (Nov-20) closed on Friday at $323.25/t, gaining just $0.09/t over the week. However, the contract declined slightly during the mid-week, as markets anticipated a bearish US supply and demand estimates report (WASDE) last Thursday. However, the WASDE lowered 2020/21 US soyabean ending stocks down 0.2Mt to 10.8Mt, supporting a small rise in futures on Friday.
US managed money funds extended long positions in US soyabean futures last week. The spread between maize and soyabean positions is now at its widest on record. Continued Chinese purchases of US soyabeans, combined with expectations of reduced maize ethanol demand, have driven a wedge between the two US markets.
Soyabean markets could see support this week with the release of the National Oilseed Processors Association (NOPA) monthly crush report later today. Markets expect the report to show US crush figures hitting a record high for May, following increased US soyameal demand. Oilseed markets could see support as it highlights a decline in the soyabean supply available.
UK delivered oilseed prices
Above average rainfall for parts of Australia in recent weeks has increased crop production forecasts. The Australian Bureau of Agricultural Resource Economics and Science (ABARES) estimates canola production to increase 40% year-on-year, to 3.2Mt. In the current season to 07 June, the EU has imported over 880Kt of rapeseed from Australia. Larger Australian production figures next season will could see export volumes increase further year-on-year.
Paris rapeseed futures (Nov-20) closed on Friday at €380.50/t, a gain of €1.25/t from Friday previous.
The UK domestic rapeseed price benefitted from the rise in Paris rapeseed futures, with harvest delivery (Erith) quoted at £331.50/t, gaining £1.00/t on the week.