Monday, 23 November 2020
This week's view of grain and oilseed markets, including a summary of both UK and global activity.
Wheat markets are still seeing support from adverse weather impacting Argentinian wheat crops. Export demand for EU wheat in the short-term is also supporting values.
Chinese demand and tight global production have continued to support maize prices. Further concerns over South American availability have seen prices continue to rally to their highest point since June 2019.
Feed barley values firmed again last week, lifted by increasing feed wheat prices. Demand for malting barley looks to remain subdued whilst lockdown restriction continues.
Global grain markets
Global grain futures
Nearby Chicago maize futures firmed again on Friday, reaching the highest level since June 2019. The Dec-20 contract was up 3.1% on the week, its third week of gains in a row. However, Chicago wheat futures (Dec-20) weakened throughout the week, closing $0.10/t down from the previous Friday at $217.98/t. This was due to weak exports and a firming US dollar.
FranceAgriMer reported last week that 95% of its winter barley was in good or excellent condition, up from 79% at the same time last year. Winter wheat drilling was 95% complete as of 16 November. Traders have reported that good conditions should give good wheat condition scores when the first ratings are out.
It is thought that French wheat exports to China this season will be strong as they are one of China’s few approved suppliers. French shipments are expected to total 1.6Mt in the first half of the season, already in line with total volumes from the whole 2019/20 season. It is thought that total full season exports to China could reach 2Mt in 2020/21 (Refinitiv).
Continuing dryness in the eastern part of the Pampas region of Argentina has led to further cuts to the Argentinian corn production forecast. It now stands at 44.5Mt, down 1% from the previous estimate, according to Refinitiv. Some recent rains in the western regions have not been enough to benefit the areas where it was needed most, and a strengthening La Niña is continuing to diminish rainfall prospects.
UK old crop (May-21) feed wheat futures continued to firm last week, up £2.20/t Friday-Friday, closing at £193.00/t. New crop futures (Nov-21) also firmed, but to a lesser extent, up £1.15/t over the same period, ending the week at £160.00/t.
Last week was the release of the third and final Cereal Quality Survey results from the 2020 harvest. For nabim Group 1 wheat samples, quality increased by 1 percentage point from the second release in early October. 32% of samples hit full specification milling quality (13% protein, 250 Hagberg Falling Number and 76kg/hl specific weight). This is 10 percentage points lower than last year’s 42% and is 5 percentage points lower than the 5-year average.
Malting barley samples from Scotland showed an average grain nitrogen level of 1.47%. However, samples in Eastern England had a high grain nitrogen level, averaging 1.89%. With the maximum nitrogen level for the export brewing market at 1.85%, this could result in an increase to the feed barley surplus in the region.
This week, we have the first official balance sheet release on Thursday, showing UK cereal supply and demand for the 2020/21 season. On Friday, we are releasing the Early Bird Survey of Planting and Planting Intentions, which will give an indication of cropping intentions for harvest 2021*.
*dates are subject to revision
Values are following the wider oilseed and vegetable oil complex higher. Rapeseed supply and demand is tight, as are the markets for substitutes. Australian yields will be watched closely.
Strong demand for soyabeans and a tight outlook will keep the market supported. However, improved planting progress in South America and any demand changes could alter this direction.
Global oilseed markets
Global oilseed futures
Global oilseed prices continued to rally last week, May-21 soyabean prices have continued to push higher $433.39/t on Friday, up $12.40/t on the week. Early trading today saw soyabean values rally further to $438.81/t.
Vegetable oils continue to be a key driver of the oilseed market rally. Firm demand and tighter supplies has seen the price of sunflower, rapeseed and soya oil rally beyond $1000/t (www.oilworld.biz).
Demand for soyabeans from China has also supported prices. Net sales of soyabeans to China from the US had reduced by an average 210Kt a week, from 1.59Mt in the week ending 8 October, to 750Kt in the week ending 5 November. However in the latest report, net sales reached 1.06Mt, offering further support.
Planting of soyabeans continues in South America, where recent rain in Brazil has helped progress. In the week ending 13 November, soya planting in Brazil was 69.5% complete, up from 55.5% the week before. Further, planting is ahead of last season’s pace; 65.3% in the week ending 15 November 2019. Soyabean production in Brazil is expected to be 10.1Mt greater than in 2019/20, at 134.9Mt, according to Conab.
Argentinian planting will also be key for soyabean price direction in the coming months. Dry weather has hampered progress so far. A report from Buenos Aires Grain Exchange, released on Thursday, showed that planting progressed 8.9% in the last week, but remains 2.5 percentage points behind last year.
The rainfall outlook is improved for Southern Brazil and Argentina in the next 14 days.
UK delivered oilseed prices
Rapeseed prices moved higher again last week. The May-21 Paris rapeseed contract closed at €411.50/t, up €4.50/t Friday-Friday. The contract looks to have hit a wall at this level, closing at €411.50/t three days in a row.
UK delivered rapeseed gained £4.00/t for December delivery into Erith, quoted at £375.50/t. With the Erith plant now crushing rapeseed again, the home has moved back to parity with Liverpool. The ability of domestic markets to continue tracking moves higher in Paris futures will largely depend on the direction of sterling.
Sterling gained against both the euro and dollar last week, with any future movements heavily linked to progress in Brexit negotiations and Covid vaccine progress.