Monday, 23 December 2019
This week's view of grain and oilseed markets, including a summary of both UK and global activity.
US trade deal hopes provided support to global wheat markets last week, however without further fundamental support have subsequently drifted.
Global maize markets also bounced due to US- China trade deal announcements. Further support could come as the dry conditions in South America are forecast to continue.
Domestic barley markets continue to be under pressure due to large old crop stocks and the prospect for a spring barley area expansion for harvest 2020.
Global grain markets
Global grain futures
Global commodity markets all recorded gains at the start of last week. Buoyed by the US and China agreeing on the terms of a ‘Phase one’ trade deal of reduced tariffs, Chicago wheat and maize futures both gained.
However, following the market bounce on Monday 16, global grain markets failed to record further gains and have subsequently drifted.
With maize planting and pollination underway in Argentina and Brazil, weather concerns in South America will once again be of greater importance. Southern Argentina is dry with little rainfall forecast and crop conditions have been downgraded. Although early in crop development, this could provide support to maize markets if adverse conditions persist.
UK feed wheat futures also received support from jumps in Chicago futures markets last week. A lift in old crop markets has allowed new crop Nov-20 to gain as well. However, with the spread between old crop May-20 contract and Nov-20 at a new contract high of £9.00/t, further divergence from old crop prices might be hard to achieve.
As wheat markets have received support, the feed barley price discount to wheat has widened. Delivered East Anglia feed barley was quoted at a £25/t discount to feed wheat on Friday 20, the largest discount recorded in 2019/20.
Rapeseed markets have received support from gains in US soyabean and wider oil market gains with rapeseed oil continuing to price at a premium to alternative oils.
While trade deal announcements have led to gains in soyabean markets, prices have settled and will now require strong US soybean exports to drive further significant gains.
Global oilseed markets
Global oilseed futures
Trade deal negotiations between the US and China led gains to be recorded in oilseed markets at the start of last week. However they were short lived, with Chicago soyabean futures (May-20) failing to break the $9.50/bushel ($350/t) ceiling. Until export sales are realised, further gains may be minimal. Brent crude prices too have recently been supportive of the oilseed market, gaining throughout the previous week as OPEC decided to prolong oil output restrictions. Prices have now settled at near $66 a barrel, as stocks remain high.
Further support for the wider oilseeds market may come with changes to Indonesian policy. It will be launching a mandatory 30% lower limited for biofuel inclusion in domestic diesel, in order to cut fuel import requirements. Increased domestic consumption in both Malaysia and Indonesia have already led palm oil prices to gain over the last year, with nearby Malaysian palm oil futures now 50% higher now than last December.
UK delivered oilseed prices
Rapeseed markets have received support from gains in both US soyabean and the wider oil market, with rapeseed oil continuing to price at a premium to alternative oils. Domestic delivered oilseed rape to Erith gained £12.50/t on the week, following gains in Paris rapeseed futures and a slight weakening of the pound following previous election gains. Now that Paris rapeseed futures (May-20) have broken the €400/t mark, prices may well now remain supported near this psychological barrier.