Monday, 29 July 2019
This week's view of grain and oilseed markets, including a summary of both UK and global activity.
Global markets continue to look well supplied. A large wheat crop is expected globally. However, the Canadian wheat area remains dry and Russian export forecasts have been reduced again.
Uncertainty over the US area continues to hang over the market, although movements have been lessened by positive weather. EU maize has suffered in the heat, tightening the global market.
The UK and EU are expecting large barley crops which will pressure the market. Furthermore, UK barley trade is uncertain with large tariffs beyond October 31st a distinct possibility.
Global grain markets
Global grain futures
Despite moving lower Friday-Friday, global grain markets were largely supported last week with cuts to global production grain supply and demand estimates.
The International Grain Council cut its estimate of global wheat supply by 6Mt, in light of challenging crop conditions in the EU, Russia and Canada. Hot weather in Russia during key development periods also saw Russian consultancy SovEcon cut their forecast for wheat exports by 6.2Mt last week, to 31.4Mt.
Despite the cuts, global wheat production is still seen at record levels.
Maize uncertainty is still challenging the market, and the supply and demand outlook for the crop is tighter for 2019/20. Weather conditions have improved in the US benefiting crop development, however the planted area remains unknown. Maize supply and demand could be further tightened with EU maize crops impacted by the recent heatwave.
UK feed wheat futures traded in a very tight range last week. Movements in the value of sterling undermined the larger daily movements seen in global grain markets. The formation of the new government and the knowledge that the UK will leave the EU on or before 31st October, saw sterling move lower at the end of the week.
Certainty over when the UK will leave the EU raises a challenge for UK barley markets, with the prospect of a large exportable surplus and large tariffs. We could see support from increased animal feed inclusion but the outlook remains bearish.
The outlook for EU rapeseed remains tight with several cuts to production estimates. However, Ukraine looks set for record production which will be needed to meet growing EU import requirement.
Globally the soyabean markets remain well supplied. Talks between China and the US are set to resume this week, which could offer some short term support.
Global oilseed markets
Global oilseed futures
Chicago soyabean futures (Nov-19) fell last week with a heavy global balance sheet weighing on prices. Conditions for the US crop are largely looking okay, with ratings unchanged last week at 54% rated as good or excellent. That said, as with maize the US soyabean area remains an unknown.
Trade talks between the US and China are set to resume this week. However, with limited progress made in previous meetings support for US soyabeans could be limited, with markets likely to be responsive to US trade data.
US soyabean stocks are likely to remain heavy at the end of the 2018/19 season, despite China waiving tariffs on 2-3Mt of US soyabeans.
The prospect of further soyabean trade between the US and China has supported the vegetable oil market of late. However, weaker crude oil prices have removed some of this support.
UK delivered oilseed prices
Paris rapeseed (Nov-19) futures gained €4.50/t last week, as continued worries of tight EU production boosted prices. Domestic rapeseed also rose with delivered OSR (Erith, Nov-19) quoted up £1.50/t on Friday, at £341.50/t.
Both the EU commission and Strategie grains lowered their estimates for 2019 EU OSR production last week, to 18.0Mt (-0.7Mt) and 17.4Mt (-0.4Mt) respectively. Further price rises for European OSR prices may be limited by pressure from the soyabean markets. For UK pricing, exchange rates will be key. The latest Monetary Policy Committee announcement on Thursday 1st August could be important for price direction.