Market Report - 28 June 2021
Monday, 28 June 2021
This week's view of grain and oilseed markets, including a summary of both UK and global activity.
Grains
Rapeseed markets were supported last week. Paris rapeseed futures (Nov-21) closed on Friday at €504.25/t, up €21.00/t across the week.
The gains shadowed the support in Canadian canola futures, forecast hot and dry weather with limited rains added to drought concerns in the Canadian Prairies.
Delivered rapeseed (Harvest-21, into Erith) was quoted at £433.50/t on Friday, gaining £20.50/t across the week.
Stratégie Grains’ latest oilseed report raised the outlook for the 2021 rapeseed crop in EU-27. Projected production has increased to 17.0Mt, up from last months’ forecast of 16.8Mt. The drop in vegetable oil prices over the last month has cut margins for crushers, reducing demand prospects for 2021/22 season.
Wheat
Global grain markets
Maize
Global grain futures
Barley
Global wheat supply is set to exceed demand in 2020/21, with good conditions for many major exporters. The ability of wheat markets to rise in the short term is tied to the uncertain maize outlook.
The global grain market is finely balanced, and the coming weeks are critical for maize supply. Adverse weather and lower production estimates would turn the market bullish again. But, expect a more bearish tone if these don’t occur.
UK focus
Barley continues to trade at a discount to feed wheat in order to compete for animal feed demand.
Delivered cereals
Global grain prices (except for US spring wheat) continued to slide lower last week. Rain fell on many, but not all, maize crops in the US Midwest. The rain should help crops as they enter a key growth stage, ‘silking’.
The International Grains Council (IGC) predicts that global grain output will exceed demand for the first time since 2016/17. But, the margin for error is very small - just 2.0Mt. Record US maize crops are a key part of this surplus. Hot, dry weather in the US could push up prices, but without it, prices are likely to drift lower.
There was also pressure from selling by speculative traders ahead of Wednesday night’s (30 June) US planted area and stock reports. The market is expecting the maize area to be 3% higher than the USDA forecast in March (Refintiv). A smaller than expected number could push prices up. But if it’s as expected or bigger, prices are more likely to come down.
Winter barley harvests are now underway in France and Russia, though thunderstorms are now causing delays in France. As harvests advance, unless results are poorer than expected, we could start to see some harvest pressure on prices as the ‘risk premium’ comes out.
The Brazilian maize crop estimate was cut again by Agroconsult, down 0.9Mt to 90.2Mt. This is far lower than the latest IGC forecast of 95.0Mt, but higher than the estimates of some private forecasters. Harvesting of the drought-affected second maize crop is underway so we will soon get clarity.
Oilseeds
UK feed wheat futures prices fell last week, following the global trend. The Nov-21 contract fell
£5.05/t to £167.60. But Nov-22 prices only lost £1.75/t Friday-Friday, at £165.20/t.
New crop delivered wheat prices fell in line with futures markets Thursday – Thursday. Bread wheat delivered to the Northwest in Nov-21 was reported at £202.50/t. This is a £33.50/t premium over Nov-21 futures on Thursday, unchanged from 17 June. Meanwhile, biscuit wheat delivered into Northamptonshire in Nov-21 was £184.00/t, a £15.00/t premium to Nov-21 futures.
New crop (Nov-21) feed barley was quoted at £159.50/t, delivered Avonrange. This is a £12.00/t discount to the equivalent feed wheat price.
Old crop (July) bread wheat delivered to the Northwest was £224.00/t, down £0.50/t from last week.
There was 78.8Kt of wheat in UK feed wheat futures stores as at 25 June, compared to 57.4Kt on 26 June 2020. This is the largest amount in futures stores for the last Friday in June since 2017, when there was 132.2Kt in stores.
Rapeseed
Global oilseed markets
Soyabeans
Global oilseed futures
Dry weather in the Canadian Prairies is slightly supporting rapeseed markets currently. But longer-term pressure is anticipated as rapeseed markets follow the wider oilseed complex.
Scattered rains across the U.S. Midwest improve crop conditions. The market awaits the USDA report on Wednesday to confirm the global bearish outlook for soyabeans.
Rapeseed focus
UK delivered oilseed prices
There was pressure for Chicago soyabean futures last week. Scattered rains in the US Midwest aided crop development and raised prospects of a higher production.
Further adding to this pressure across the week, were demand concerns for soyabeans. The US Supreme Court has made it easier for small oil refineries to win blending exemptions in biofuels, potentially reducing the demand for oilseeds.
This bearish news has made speculators rethink bullish positions. The funds sell-off of Chicago soyabeans in the last two weeks was the largest move since early 2020. In the week ending 22 June, money managers cut their net-long position in soyabean futures and options to 80,304 contracts from 107,492 in the week before (Refinitiv).
Despite the potential demand destruction for biofuels, there is still significant support for crude oil. Nearby Brent crude oil futures strengthened by 3.6% across the week to close on Friday at $76.18/barrel.
A key watch point for oilseeds will be this Wednesday’s (30 June) US acreage and stocks reports. The market is expecting an increase to the soyabean area from the March report.
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