Monday, 17 February 2020
This week's view of grain and oilseed markets, including a summary of both UK and global activity.
In the short term the market is falling on stronger export competition, the longer term picture is still uncertain and dependent on weather in the Black Sea, US and EU.
Large crop expectations in Brazil are keeping the maize market subdued, weather will be watched closely for changes in safrinha crop expectations. Chicago futures are moving lower on export competition.
With wheat moving lower barley will likely follow suit in order to remain competitive. A large crop is expected next season and prices are also under pressure from cheap maize.
Global grain markets
Global grain futures
As we move through February it has become apparent that we are largely in the grips of a weather market. Some of the fundamentals of winter crops (US and EU areas) are known but the market is largely unaware of the size of 2020/21 crops. The result of this is a market that will be susceptible to swings in weather and trade news.
World grain markets, with the exception of Paris milling wheat, saw wholesale declines last week. US maize exports are under pressure from Black Sea supplies and improved weather conditions in South America. This is continuing to add pressure to the grain complex as well as maize prices.
Wheat markets have been on the receiving end of pressure from global export competition. Competition for tenders from Egypt and Algeria last week pushed prices of wheat lower in the Black Sea. Egypt state grain buyer (GASC) purchased 360Kt of Russian and Romanian wheat at an average CIF price of $239.44/t. In GASC’s last tender (30 January) 180Kt of French wheat was purchased, at $246.10/t.
The AHDB Early Bird Survey update will be released on Wednesday 2pm, giving an up to date view on what is (and isn’t) in the ground for harvest 2020. With the unbelievably challenging autumn-winter we have had, the report will provide some vital clarity.
Domestic feed markets moved lower again last week, following global prices lower. East Anglian feed wheat and barley (Delivered, Spot) lost £1.50/t and £2.00/t, quoted at £154.00/t and £131.50/t respectively, prices fell to a lesser degree in the West.
Milling premiums extended last week, uncertainty over new crop availability is still a major factor in pricing.
There are still anxieties over the coronavirus, however there is a sentiment driven renewed confidence in Chinese economic productivity. There are still tight supplies of rapeseed in Europe, the market will continue to trade off the back of soyabean markets and the weakening euro going forward.
In the short-term strong export demand for US soyabeans support the market. However, the Brazilian soyabean harvest is underway with above average yields reported. Further to that, planting is complete in Argentina with ideal climatic conditions. In the medium to long term this could offer a bearish outlook.
Global oilseed markets
Global oilseed futures
Nearby Chicago soyabean futures closed at $328.40/t on Friday, gaining $4.32/t across the week. Prices did move $0.90/t lower on Friday, on profit taking following a run of gains. US exports remain relatively stable and on target for the time of the season.
The Brazilian soyabean harvest is 15.7% complete with above average yields. Both the USDA and Conab have increased their estimates of 2019/20 soyabean production for Brazil. The USDA forecast production at 125Mt, up from 117Mt in 2018/19.
Nearby Malaysian palm contract was down 5.2% Friday-to-Friday, despite the previous week’s gains from reported lower stockpiles. Malaysian palm oil exports have dropped sharply going into February, as demand is reduced from China and India.
There has been a rebalance in trade flows, as Malaysian palm oil is at a discount to Indonesian supplies. Price sensitive nations switch to Malaysian palm as Indonesian palm oil gains a premium on anticipation that India will purchase large quantities.
UK delivered oilseed prices
Paris rapeseed futures (May-20) closed on Friday at €399.50/t, up €7.25/t on the week before. This increase coincided with the 5.2% increase in nearby Brent crude oil, to close Friday at $57.32/barrel.
Last week, UK delivered rapeseed (Erith, Feb-20) reduced by £2.00/t on previous weeks quote of £336.00/t. The reduction in price is partly due to a strengthening of sterling, gaining 2.32% against the euro over the week, to close on Friday at £1 = €1.204
Latest UK trade data shows that the UK imported over 32.2Kt of rapeseed for December. Imports for Jul-Dec have increased by 103% on the same period last year.