Monday, 24 August 2020
This week's view of grain and oilseed markets, including a summary of both UK and global activity.
Please note, due to revised figures from our data providers we have made minor adjustments to the percentage of area harvested for each crop in the previous 2020 harvest progress reports. To view the updated reports and dashboard click here.
Globally wheat stocks-to-use is up year-on-year, but a poor start for crops in Argentina with dryness and frosts needs monitoring. In the short-term, UK physical price premiums are likely to remain historically firm on limited trade.
Despite expectations of large global supplies of maize, concerns are creeping in for US production. The latest US yield forecasts from the Pro Farmer tour are above average but have fallen short of USDA expectations.
Barley is maintaining its discount to other feed grains in order to remain competitive into export markets and compounders, a trend that is likely to continue.
Global grain markets
Global grain futures
Corn continues to be a watch point for global grain markets, and concerns around the impact of recent US storms have driven corn futures (Dec-20) up $4.72/t since the start of August. Further support for corn futures is seen in the US managed money funds where traders have slimmed their net short position to -8.4% as at 18 Aug versus -12.1% a week previous.
Longer term the outlook for maize is less bearish. The results of the US Pro Farmer crop tour, which surveyed crops in the Midwest, shows yields in six of the seven states surveyed up on the five-year average. Despite this the tour estimates national yields to be lower than the most recent USDA yield forecasts. Most notably the tour estimates yields in Iowa, the region most hit by storms, at 180bu/ac (12.1t/ha), compared to a five-year average of 198bu/ac (13.3t/ha).
Global wheat markets firmed on Friday, with Paris (Dec-20) and UK (Nov-20) markets erasing losses made earlier in the week. The move higher (+€2.50/t, to €183.75/t and +£2.10/t, to £166.25/t) was exacerbated by the weakening of sterling and the euro against the dollar.
One of the key drivers for wheat markets in the second half of this season will be production in the Southern Hemisphere, with Northern Hemisphere production tighter for some key producers (EU, Ukraine and US). However, Argentinian production could also take a hit, with frosts now intensifying the poor start to planting which was impacted by dry soils.
With a smaller wheat crop on the horizon, potentially around 10.3Mt, UK markets continue to track global trends and followed Paris milling wheat futures higher. UK feed wheat futures (Nov-20) moved lower through the week, down £1.35/t Monday-Thursday, before rising £2.10/t on Friday to close at £166.25/t.
Once again the physical market remains firm. A shortage of selling is pushing premiums to futures prices higher in order to fulfil commitments. East Anglian delivered feed wheat premiums for Nov-20 extended to £4.35/t over Nov-20 futures, as at Thursday. At the same point in 2012 (23 August) the delivered premium for East Anglian feed wheat (Nov-12 delivery) was £0.90/t under Nov-12 feed wheat futures.
An elevated level of import demand for rapeseed in the EU + UK this season (6.0Mt) will keep prices supported. A weakening euro currency offers support too.
A US crop tour last week predicted record soyabean yields, despite dryness concerns. That said, strong US export sales offers price support.
Global oilseed markets
Global oilseed futures
New-crop US soyabean export sales continue to amass ahead of the new marketing year that begins on 1 September. On Friday, the USDA reported soyabean sales of 400Kt to China and 368Kt to ‘unknown destinations’, likely China, for delivery in the 2020/21 season. Frequent Chinese purchases of US origin soyabeans have supported oilseed markets.
Dryness concerns across the Midwest have developed in recent weeks, offering support to markets. Despite this, the US Pro Farmer crop tour that surveyed fields last week estimates US soybean yields at a record level, with production estimated at 118.7Mt. For reference, the USDA estimates production at 120.4Mt. With potential for a tropical storm and hurricane to hit the US Gulf this week, high levels of rainfall could push into the Midwest, replenishing soil moisture levels.
US fund managers increased their long (bullish) position in CBOT soyabean futures by 46,168 contracts, a new weekly record in data back to 2006. The potential for storm damage and strong US export demand were the main push behind this move. As of 18 Aug, the net long stance is the biggest since the US-China trade dispute started back in 2018.
The Russian analytical firm IKAR reduced its estimate for the Russian sunseed harvest following extended periods of dry weather. The crop is now estimated at 13.6Mt, down from 13.8-13.9Mt.
The Nov-20 Malaysian palm oil futures contract fell 2% on Friday following an up to 21% fall in August palm oil product exports compared to July.
UK delivered oilseed prices
Paris rapeseed futures (Nov-20) closed on Friday at €379.75/t, a rise of €3.75/t on the week. On Friday, rapeseed delivered (Nov–20, Liverpool) was quoted at £348.00/t, an increase of £2.50/t on the week.
Dutch rapeseed oil prices were able to increase because the euro weakened against the US dollar. The euro lost 0.4% against the US dollar Friday-Friday.
Last week, the Ukrainian rapeseed crop was lowered 0.2Mt and is now forecast at 2.7Mt, down from a record 3.4Mt last year, according to UkrAgroconsult. Strong EU import demand and the lowered production figures have led to a rise in Ukrainian domestic rapeseed prices.