Monday, 16 December 2019
This week's view of grain and oilseed markets, including a summary of both UK and global activity.
Southern hemisphere wheat supplies are reduced in this month’s WASDE. However, global supply still remains high.
Despite poor Canadian yields and increased US pricing, 2019/20 global production has been revised higher than anticipated.
Large global supplies, including a big domestic crop will likely continue to pressure prices. Domestic barley area is also forecast to rise for 2020 harvest, potentially widening the discount from feed wheat.
Global grain markets
Global grain futures
US maize futures (May-20) gained $2.17/t last week, to close on Friday at $152.76/t, the highest since mid-November.
Similarly, US wheat futures (May-20) rose on the week, to close Friday at $195.64/t, despite dropping to a near three-week low mid-week, in a bid to be more competitive with global supplies.
Paris wheat futures (Mar-20) closed Friday, unchanged on the week at €183.25/t. Last week, the French Farm Ministry published a 5% reduction in planted wheat area. However, FranceAgriMer increased its forecast for French soft wheat exports.
The latest USDA supply and demand estimates (WASDE) forecast decreased US wheat supplies, increased exports and lowered ending stocks. It also reported reduced Australian and Argentinian wheat production estimates, by 1.1Mt and 1.0Mt respectively.
UK wheat futures (May-20) closed on the week at £147.55/t, gaining £0.05/t. However, new-crop (Nov-20) closed at £154.70/t, down £0.30/t.
The latest GB arable crop report showed that by the end of November, only 60% of winter wheat was drilled, with barley slightly higher at 65%. However, there are concerns over the development of newly planted crops, which has been offering support recently.
UK trade data, released last week, highlighted 1.36Mt of barley available for free stock, or to be exported, before the end of June.
Domestically, rapeseed prices have been pressured by currency moves. A tightening global supply, led by Australia and Canada, in addition to rising oil prices has lent support globally.
US soyabeans continue to find support from China, with a “phase one” trade deal agreed between the two nations. Rising oil markets offered further support.
Global oilseed markets
Global oilseed futures
US soyabean futures (Mar-20) have recently seen gains on the back of China-US trade deal progress. From Monday 2 December to Friday 13, gains of $13.32/t were recorded. Last week, a “phase one” deal was confirmed between the two countries, but it is yet to be established exactly how much China may buy.
Other support has been found for oilseeds from the liquid market. Tightening supplies of palm oil have led to sharp price rises. Nearby Malaysian palm oil futures have risen 36.6% ($182.46/t) since mid-October. This has helped bolster other oils, such as Chicago soyabean oil, which gained 4.1% last week, the equivalent of $27.78/t.
UK delivered oilseed prices
Paris rapeseed futures (Feb-20) have generally been on an upward trend for some time now. Since 21 October to 13 December gains of €24.00/t have been recorded, closing Friday at €400.00/t.
A tight EU oilseed rape outlook, and a rising oil market, have supported this movement. However, domestic prices are driven significantly by currency movements, being priced off Paris futures.
Following the elections on Thursday, sterling strengthened 1.35% against the Euro, to close Friday at £1=€1.1987, the strongest since July 2016. This movement pressured domestic physical prices, with the Feb-20 contract falling £0.42/t on the week, while Paris rapeseed futures (Feb-20) recorded gains of €3.00/t over the same period.