Monday, 26 August 2019
This week's view of grain and oilseed markets, including a summary of both UK and global activity.
Global wheat markets have continued to fall in what is a bearish, well supplied market. In order to maintain export competitiveness, UK feed wheat futures have been further pressured.
Maize markets continue to drift lower amid improving, albeit variable US crop conditions and greater prospects for the European maize harvest.
Domestic barley prices remain pressured due to falling demand from feed mills with the discount to wheat narrowing, and a lack of continental demand beyond the end of October.
Global grain markets
Global grain futures
Global grain markets continue to have a bearish tone, in what remains a well-supplied outlook for 2019/20. Managed Money funds have now returned to a net short position in Chicago futures for both wheat and maize, expecting prices to fall further.
While the ProFarmer US crop tour found maize yields to be 3.6% below that of the USDA estimate, conditions have been improving in both the US and Europe, increasing the potential size of the grain harvest.
Wheat markets have also continued to drift, with Paris milling wheat futures falling during the week. Black Sea export competition is mounting and Russian milling wheat prices fell a further $4.00/t during last week to gain tenders amid competition from Romania and Ukraine.
As all major exporters are forecast larger crops this season, export competition is likely to be greater keeping Black Sea wheat pressured to win export sales. GASC tendered again today, with Russia offering 640Kt for October shipment.
UK grain markets continue to be pressured. Above average yields in the south and east of England have increased the potential size of the UK wheat crop and exportable surplus.
UK feed barley is pricing competitively against the latest Saudi Arabia tender results, averaging $206.76/t CIF. However, there is limited European demand post-October.
Falling wheat prices have narrowed the barley discount and reduced demand from feed mills.
A recovery in the value of the sterling has also pressured UK cereal markets. With the pound still near historically low levels, there remains a significant price risk for domestic wheat prices, should the pound strengthen further.
Supply continues to look tight for the EU moving the prices of both seeds and oil higher. Top end for prices could be capped by soyabean supplies.
World supply of soyabeans continues to look ample with crop conditions improving in the US. However, the ongoing trade war between China and the US continues to drive volatility.
Global oilseed markets
Global oilseed futures
Soyabean prices moved lower Friday-Friday, driven by continued concern over the trade war between China and the US. China did buy a small amount of soyabeans (2019-20 crop - 66Kt) from the US in the week ending 15 August, but the threat of new tariffs continued to drive the market lower on Friday.
Adding to the weight of the soyabean market, crop conditions for soyabeans improved in the latest USDA crop report, 55% of the crop was rated as “good” or “excellent”, up 2 percentage points on the week.
While crop conditions may be improving, the ProFarmer tour in the US Midwest could offer some support. Soyabean yields are seen at 3.10t/ha, 5% below the latest USDA projection and 12% down year-on-year.
While prices have fallen for soyabeans there is also some potential support from market volatility. Increased optimism around the US-China trade war yesterday saw Nov-19 soyabean futures move up $3.95/t, to $318.63.
UK delivered oilseed prices
Paris rapeseed futures were lower last week, weighed down by soyabean prices (read more above) closing on Friday at €376.00/t, a fall of €4.00/t. Prices recovered slightly yesterday.
The rapeseed market continues to look tight both in the EU and domestically. The latest AHDB harvest report pegged rapeseed yields at 3.0t/ha to 3.3t/ha, suggesting a UK rapeseed crop of 1.54Mt to 1.70Mt, the smallest since 2004/05.
UK delivered rapeseed prices (Erith, Harvest-19) were quoted at £340.00/t, £1.50/t higher week-on-week. The direction of sterling will continue to be important to the path of UK oilseed rape prices as we move forward.