Monday, 2 September 2019
This week's view of grain and oilseed markets, including a summary of both UK and global activity.
Global wheat prices have continued to fall in an increasingly well-supplied market. Both US winter and spring wheat futures have pushed lower amid expectations of good quality and supplies.
Chicago maize futures have been pressured by falling wheat markets. Although the US outlook for production is uncertain, further pressure has come from falling sugar prices.
Although export competitive, barley is suffering from minimal continental demand post October. With larger wheat and barley crops in 2019/20, barley will need to maintain a discount to wheat.
Global grain markets
Global grain futures
Global grain markets have continued to fall as northern hemisphere wheat production estimates for 2019/20 grow.
In the August IGC global supply and demand estimates, EU wheat production was raised month-on-month by 1.5Mt, to 150.2Mt. Production estimates were also raised for the US, Canada and Ukraine, further adding to global export competition.
The larger EU crops, especially in France and Germany, have pressured Paris milling wheat futures, with French wheat the cheapest offer for recent Egyptian tenders. However, Russian wheat continued to dominate sales.
Although maize markets are coming under pressure from wheat, there remains uncertainty around the potential size of the US crop. However, beneficial weather for crop development has added weight to previous upwardly revised production estimates.
Increased tension between the US and China has also led crude oil prices to fall. Coupled with a bearish sugar market, maize demand for ethanol may fall, also contributing toward increased fund short positions in Chicago futures.
UK grain markets have continued to slide. Above average yields have increased the market view of the potential size of the wheat crop.
UK feed barley has also continued to fall away. Although pricing competitively relative to other European origins, UK feed barley has been finding little demand from EU buyers from October onwards, owing to Brexit uncertainty. With limited current export demand, domestic barley needs to maintain a discount to wheat.
Statistics Canada have downgraded the prospects of Canadian canola production. Canada is a source of late-season rapeseed into Europe which is facing short-supply from a poor 2019 harvest.
US soyabeans are described as vulnerable due to late planting but weather is currently favourable aiding good crop prospects. The US-China trade war will continue to weigh on the market.
Global oilseed markets
Global oilseed futures
Paris and Chicago oilseeds futures (Nov-19) climbed last week. Paris rapeseed futures (Nov-19) rose €5.50/t Friday to Friday to close at €381.50/t. Similarly Chicago soyabean futures (Nov-19) gained week-on-week, $4.59/t, to close at $319.27/t.
Some discussions took place last week between the US and china, with more due to happen this week also. This has given some hope that trade will continue between the two countries, alleviating some of the weight around soyabean stocks. The latest round of US tariffs on Chinese goods came into play yesterday (1 September).
There has been some concerns around US weather, supporting soyabean prices. The risk of frost hitting the developing soyabean crop has raised concerns. The crop was already historically late planted due to floods and has been described as vulnerable as a result. Nevertheless, the weather is currently favourable aiding good crop prospects.
UK delivered oilseed prices
Despite a rise in Paris futures, UK delivered oilseed rape (Erith, November) dropped £0.50/t, quoted £349.00/t on Friday. The uptick seen in European futures was counteracted by strengthening in sterling across the week.
However, sterling has since weakened this morning which, if continued, could offer support to UK physical prices again.
The UK and Europe will be in short-supply of rapeseed, due to poor harvests, resulting in increased imports of oilseeds and oilseed products. Some import requirement is usually fulfilled by Canada however Statistics Canada have estimated a 9.3% drop year-on-year in canola production due to a decrease in harvested area.