Monday, 20 January 2020
This week's view of grain and oilseed markets, including a summary of both UK and global activity.
Reduced planting in Western Europe could be mitigated if Russia’s positive drilling corresponds into successful production. Domestically, the spread between old and new crop UK futures has narrowed as dry conditions have allowed drilling to resume.
Although reactively dropping to a one month low on the back of US – China trade deal disappointment, Chicago maize markets are well supported with demand for existing stocks and supplies.
Barley has gradually increased led by wheat, however the discount to wheat has grown. We could see this discount continue if spring barley increases in area.
Global grain markets
Global grain futures
Paris milling wheat futures (May-20) closed on Friday at €192.75/t, gaining €2.50/t on Friday’s close. On Wednesday, the contract closed at its highest since Aug-2018, as export demand coincided with French labour strikes.
US maize futures (May-20) closed on Friday at $155.60/t, up $0.98/t on the Friday before. This contract dropped to a one month low on Thursday as doubts arose on the quantity of US crops that would be purchased by China under the new phase 1 trade deal. China’s pledge to purchase US agricultural products was based only on market conditions.
However, on Friday this contract rose by 3.7% surpassing Thursday’s decline. This was from bargain buying, increasing expected exports and internal demand for US maize, preventing maize from declining for a third week running.
US wheat futures (May-20) closed on Friday at $209.90/t, up $1.75/t on the week. This contract closed at over a year high on Wednesday. Throughout the week, the US was supported by technical buying, strong export demand and rising US maize futures.
Due to technical issues, we are unable to publish both delivered and futures prices in today’s Market Report. The website will be updated once these have been resolved.
UK wheat futures (May-20) closed on Friday at £156.35/t, gaining £2.75/t on the week before. Furthermore, the Nov-20 contract closed at £164.90/t, gaining £2.00/t over the same period.
Firming export prices in the Black Sea region and Western Europe helped support domestic prices this week, on the back of prices sustained by poor autumn drilling conditions.
However, the spread between old and new crop futures has reduced by £0.75/t on the week, to £8.55/t as recent dry conditions have allowed drilling to resume.
Downturns in crude oil have weighed on the vegetable oil market. With the premium that rapeseed has over that of alternative oils already stretched, rapeseed markets are increasingly sensitive to the global oil market.
Temporary disappointment in the details of the Phase 1 US-China trade deal led to a downturn in Chicago soybean futures. However, with an on track export pace there remains longer term support.
Global oilseed markets
Global oilseed futures
Expectations that the US-China phase 1 trade deal would lead to a large export program were dashed with details and comments surrounding the trade deal amounting to China purchasing in line with market conditions.
The lack of optimism led to a short term fall in Chicago soyabean futures, which have since recovered some of the lost ground.
The pace of US soyabean exports have been providing longer term support with 23.24Mt exported so far this season out of a forecast 48.31Mt. This leaves exports in line with forecasts, regardless of major purchases from China.
Movements in crude oil markets have also been leading the vegetable oil market downward. However, pipeline closures in Libya risk reducing crude supply and has led to a rally in oil. This could now provide support to vegetable oil markets.
UK delivered oilseed prices
Paris rapeseed futures fell over the course of last week, May-20 down €10.75/t from Friday 10 to Friday 17. Losses in Paris rapeseed futures have been on the back of falls in crude oil markets. Nearby Brent crude has fallen from $68.91/bbl on the 6 January to $64.00/bbl on 15 January.
Following the shutting down on Sunday of oil pipelines in Libya, which risks reducing the output and supply, nearby Brent crude has gained over 2% since January 15. Paris rapeseed futures (May-20) have since felt support and by 1pm today (20 January) had gained €9.00/t from last week’s low. Should further disruption in oil markets continue then there will likely be further support for rapeseed.