Monday, 24 February 2020
This week's view of grain and oilseed markets, including a summary of both UK and global activity.
Global wheat prices ended the week slightly up, with news of lower-than-anticipated Australian production figures. However, news of large wheat production figures across Black Sea regions look set to weigh on domestic markets in the longer term.
Maize markets continue to be guided by updates to Brazilian planting schedules and export shipments. Global maize markets are expected to remain well-supplied for the foreseeable period.
Barley markets are relatively unchanged from last week, the market continues to be well-supplied domestically. Prices will remain under pressure from the presence of imported maize in feed markets.
Global grain markets
Global grain futures
Global economic markets have taken a big hit this morning. Renewed fears over the global impact of the coronavirus outbreak have pressured markets.
World grain markets saw rises early last week, led by estimates of a 12-year low Australian wheat production figure. However, this support began to fall away as the week progressed and markets adjusted to the news.
Strong Russian wheat production forecasts could see the country harvest its second largest crop on record.
Last week, the latest French crop conditions report has highlighted the effect of a difficult winter planting window. Winter wheat was rated at Good/Excellent was at 65% as of 17 Feb, down on the average of 90% for this point in the season. Though the condition of the crop has been known to markets for a while, updates will still provide sentiment to grain markets.
In the first Saudi Arabian (SAGO) tender of the year, 715Kt of wheat was bought at an average price of $247.46/t.
Last week saw the publishing of multiple important reports that gave updated information on a difficult planting season so far. Our Early Bird Survey estimates were released on Wednesday, highlighting a 17% decline in the intended UK wheat area.
Our UK production estimates for the upcoming season were released on Friday. The report details a range between the ‘worst-case’, ‘mid-range’ and ‘best-case’ scenarios.
- Wheat production is estimated at 10.74Mt, using the “mid-range” forecast of area and yield.
- Barley production is estimated at 6.40Mt, using the “mid-range” estimates. The degree of spring barley planting may cause production figures increases.
Domestic feed markets saw slight increases last week, following the early week rises in global markets. East Anglian feed wheat and barley (Delivered, Spot) increased £1.50/t and £0.50/t, quoted at £155.50/t and £132.00/t respectively.
UK markets face even tighter domestic supply for 2020/21. Europe have continued to fulfil requirements with imported supplies of rapeseed and sunflower seed but despite these sitting higher than last year have slowed more recently.
Coronavirus continues to subdue Chinese markets adding a bearish sentiment to soyabean trade. Latest US export sales are below trade expectation and South American supply remains plentiful also adding pressure to US markets.
Global oilseed markets
Global oilseed futures
A relatively bearish sentiment still surrounds soyabean trade on the back of coronavirus. Chinese markets are reportedly slow despite the phase-one deal between the US and China. Also, South American supplies remain plentiful and well-priced adding additional competition for the US.
The USDA pegged committed soyabean export sales at 497.7Kt for week ending 13 February which sat over 100Kt below the low end of trade estimates according to a Reuters poll. Chicago soyabean futures (May-20) only lost $1.56/t from Friday-to-Friday to close at $330.29/t. This has moved lower today to $323.16/t.
Brazil received some welcome rain in late planted soyabean areas and harvest is now well over half way with decent yields recorded.
Oil markets have also been relatively weak. Both Chicago soyabean oil and Malaysian palm oil futures (May-20) reached lows since the low in January caused by the outbreak of coronavirus. Prospects of higher production of Malaysian palm oil and concerns surrounding demand following the spread of coronavirus both within and outside China may continue to supress markets.
UK delivered oilseed prices
Despite a rise of €3.25/t early on in the week, Paris rapeseed futures (May-20) closed just £0.50/t higher Friday-to-Friday, at €400.00/t. Domestically, delivered rapeseed (Erith, Feb-20) saw gains of £2.00/t, priced at £336.00/t, the drop in the value of sterling against the euro offered some support.
Imports of rapeseed into Europe remain at high levels, up 47% from last year to 4.18Mt (w/e 16 February) but for how long this can continue is under question. The need for oilseed imports will likely remain through to 2020/21.
The Early Bird Survey rerun, implies further losses in the OSR area for 2020 harvest. Currently the estimated area sits at 361Kha, but is still subject to further losses if the unprecedented weather persists. Based on this area and a five-year average yield, UK production could be just 1.26Mt (see Alex’s GMD for further estimates), this is likely the best case scenario and highlights a reliance upon imports going forward.