Monday, 25 November 2019
This week's view of grain and oilseed markets, including a summary of both UK and global activity.
Despite short-term worries for some EU crops, global wheat supplies are ample for 2019/20 and area is forecast to increase 1% globally in 2020/21.
Slow US maize harvest is negated slightly by a sluggish export programme out of the States and improved production forecast by the IGC.
Domestic barley markets continue to hold a £16/t discount to wheat to keep export competitive.
Global grain markets
Global grain futures
Global wheat futures ended last week higher and are slightly firmer again this morning. We end November amid concerns over US wheat acres, EU new-crop worries and continued uncertainty over Australian production being shadowed by a large 2019 wheat crop and forecasts for an expanded 2020 global wheat area.
Conditions of French crops have worsened over the past week. On Friday, the French Ministry estimated 78% of the soft wheat crop is in good/excellent condition, down 6% points from the previous week. Planting of the wheat crop had only increased 3% points to 74% adding to market caution over new-crop potential.
However, it is worth remembering that most of this concern is focussed on new-crop and we have a large northern hemisphere wheat crop from 2019 to contend with. Last week, the International Grains Council (IGC) kept their 2019/20 global wheat S&D unchanged with production at 762Mt (+29Mt year-on-year) and end-stocks at 271Mt (+6Mt year-on-year).
The IGC also forecast the global wheat area to increase by 1% to 218Mha. Increases in Russia are seen as the main driver and outweigh any losses in EU area and a reduction in Ukraine due to dryness during the planting window.
UK autumn drilling has been challenging throughout the country and has been supporting prices recently. However, this trend has switched with UK feed wheat futures for both old-crop (May-20) and new-crop (Nov-20) dropping last week by £2.90/t and £3.10/t respectively. The UK may be facing issues but the global outlook remains for large crops into the 2020/21 season.
UK physical prices also dropped off slightly last week with December feed wheat contracts dropping £1.00-£1.50/t depending on destination.
The Early Bird Survey provisional results released today show a change in area of cereal crops intended for 2020 harvest. Wheat area is currently intended to drop 9% to 1,645Kha. This is currently the smallest area since 2013, another year that experienced a very wet autumn. The survey indicates intentions to plant and therefore this area could drop further if poor weather persists.
In contrast, but unsurprisingly, the spring barley area is intended to rise for 2020 harvest to 915Kha, an increase of 28%. For more information on planting intentions for 2020 harvest please visit the Early Bird Survey webpage.
Old-crop markets remain tight and the outlook for UK crops remains unfavourable.
Slow progress in the US-China trade deal continue to offer negative sentiment, with a good week for US exports and slow Brazilian planting offering some support.
Global oilseed markets
Global oilseed futures
Soybean planting pace in Brazil is steadily slowing which may impact the second crop of maize, usually planted after the soybean harvest. Soybean acreage in the ground is estimated at 77.3% by Friday 22nd. This compares to nearly 90% of the area planted by the same stage last season.
The knock-on impact will be a delayed second maize crop which may develop outside of the optimal weather window and reduce yield potential. Whilst this is a long-term issue, it highlights the importance of South American crops in the world market and any adverse weather issues in the New Year will likely see a market reaction.
US soybean futures have continued to fall from the highs seen in early October as optimism over a new US-China trade deals fades. However, the US recorded export sales of soybeans at over 1.5Mt last week which gave the market some optimism during this bleak time for trade.
UK delivered oilseed prices
UK physical rapeseed prices rose last week. Depending on the UK destination delivered OSR in December gained £2.50-£3.00/t. The UK supply of OSR is tight for 2019/20 and is expected to remain tight after 2020 harvest.
The provisional results of the Early Bird Survey show a drop in oilseed rape area of 23%. This leaves the intended area of OSR for harvest 2020 at 406Kha at present. This could drop further due to ongoing issues post-establishment. Some crops have been devastated by cabbage stem flea beetle attacks and also others have been hindered by heavy rainfall. For more information on the Early Bird Survey please visit the webpage.