Monday, 28 September 2020
This week's view of grain and oilseed markets, including a summary of both UK and global activity.
Weather remains a key watch for global grain markets, with dryness in South America and the Black Sea regions. UK markets will continue to maintain a premium to global values.
Maize has backed away from recent highs, longer term large crops are expected in South America, subject to improved weather conditions. US maize harvest adds potential pressure.
Both domestic and global production of barley remain high. Feed barley continues to be priced at a notable discount to feed wheat.
Global grain markets
Global grain futures
Last week, Paris wheat prices (Dec-20) remained strong, closing at €192.25/t on Friday, a slight discount on the previous Friday at €194.50/t. Whereas Chicago wheat prices took a fall last week in line with the strengthening dollar, forcing prices down to remain competitive on the export market.
With Chicago wheat prices falling last week Russian export prices fell slightly, curbing growth in prices in spite of the rouble trading near to a six-month low against the dollar. Yet, domestic prices continued to rally in Russia from strong demand and reluctance of Russian farmers to sell. With dryness affecting planting and strong prices, the Russian Agriculture ministry will reportedly make a decision in October about imposing a quota on exports in Jan-Jun 2021.
Global supply was under strain last week, with high temperatures and dryness in the southern hemisphere affecting the key maize producers Brazil and Argentina. Concerns for 2021 planting is offering support to maize prices. In the northern hemisphere, Ukraine wheat growers are reported to have not yet begun winter wheat sowing for 2021, due to the severe drought across most regions.
Elsewhere, European Association Coceral revised down the EU maize crop forecast for 2020 to 62.8Mt, a cut from the forecasted 64.6Mt last month.
Demand remained strong last week, supporting Ukraine’s 2020 milling wheat exports by around $6/t. Kazakhstan are likely to export 6.7Mt of wheat and wheat flour this season. This figure is up from 6.6Mt in the previous season.
UK feed wheat futures continued to rally last week, the Nov-20 contract closed on Friday at £182.75/t, a gain of £3.50/t on the previous week’s close. With last week’s movements Nov-20 and May-21 contracts moved to parity. The Nov-21 contract is now at a £27.75/t discount to Nov-20.
The rallying futures market has squeezed physical premiums for November delivery in some locations. Premiums at Avonmouth, North Humberside, Oxfordshire and the West Midlands for feed wheat were all reported to be down £1.00-1.50/t. A similar picture was seen for North West, Midlands and Yorkshire milling wheat, with imported grain also likely to be capping values.
The latest AHDB harvest report was published on Friday showing harvests in Great Britain to be almost complete;
- Wheat– 98% complete. GB national yield estimated at 7.1 – 7.3t/ha, 13-15% below the 2015-2019 average.
- Winter barley– 100% complete. GB national yield estimated at 6.5 – 6.7t/ha, 6-9% below the 2015-2019 average.
- Spring barley– 97% complete. GB national yields estimated at 5.8 – 6.1t/ha, 1-6% above the 2015-2019 average.
- Oats– 97% complete. GB national yields estimated at 5.1 – 5.3t/ha, 6-10% below the 2015-2019 average.
- Winter oilseed rape– 100% complete. GB national yield estimated at 2.7 – 3.0t/ha, 15%-23% below the 2015-2019 average.
A large canola crop in Canada is being harvested which will pressure prices. Going forward mounting worries over coronavirus infections will limit any gains if energy markets are pressured towards the end of the year.
After successive weeks of a supported soyabeans market off the back of Chinese demand, the market is currently pressured from US harvest which is progressing. However, the market is well supplied going forward, as large areas in South America are anticipated.
Global oilseed markets
Global oilseed futures
A pressured week across the board for the oilseed complex. Chicago soyabean futures (Nov-20) closed Friday at $383.36/t, down $15.07/t across the week.
Strong export demand has driven the rally over the last six weeks. However, dry weather in the US Mid-West allowed harvest to progress, with direct sales from the field, this has pressured the market.
This harvest pressure has overshadowed the dry weather that Argentina and Brazil are currently experiencing.
Malaysian palm oil futures (Dec-20) reduced by 8.38% across the week, following the wider vegetable oil complex lower.
This pressure was also encapsulated in Chicago soy oil (Dec-20) which lost 6.6% across the week to close Friday at $723.56/t.
Despite this pressure the contract did gain 2.4% on Friday from strong exports and severe flooding in top palm oil producer Indonesia. Cargo surveyors, Societe Generale de Surveillance said that exports from Malaysia during Sept. 1 to Sept. 25 jumped 14.1% from the month before.
With a lack of confidence in energy markets due to mounting worries of increasing coronavirus infections in Europe and a strengthening US dollar, Brent crude oil (nearby) closed on Friday at $41.92/t, down 2.85% across the week. If pressure in crude oil continues this will depress the vegetable oil complex.
UK delivered oilseed prices
Last week, Paris rapeseed futures (Nov-20) lost all the gains made in the previous week. The Nov-20 contract closed on Friday at €384.50/t, reducing by €10.50/t across the week.
UK delivered oilseed rape (Nov-20, Liverpool) was quoted at £357.00/t, down £9.00/t across the week. Strengthening sterling by 0.42% against the Euro across the week would not have supported domestic prices, sterling closed on Friday at £1 = €1.0953.
ICE canola futures (Nov-20) have also encapsulated this weekly pressure to close Friday at CA$518.30/t, down CA$13.00/t across the week. Part of this is due to harvest pressure as 26% of Canola harvest was completed in Alberta, and 61% was completed in Saskatchewan, according to their latest crop reports.