Monday, 30 September 2019
This week's view of grain and oilseed markets, including a summary of both UK and global activity.
UK and European wheat supply is plentiful which will likely keep prices pressured. However, rainfall affecting the US spring wheat harvest and dryness in Australia and Argentina could counter this.
Mixed prospects for global maize production are causing markets to drift. There are some potential bullish factors to watch, notably French harvest progress and quality and South American dryness during planting.
A well supplied market, both in the UK and Europe continues to pressure prices. Brexit uncertainty will also weigh on prices, with barley needing to remain competitive into non-EU markets.
Global grain markets
Global grain futures
Harvest of Hard Red Spring wheat in the US is 10 percentage points behind the 5-year average (as at 22 September). Progress may have been limited last week with wet weather prominent, but drier conditions are forecast for the coming weeks.
The Canadian wheat harvest is also behind average and this week’s forecast for snow will hinder this further if realised.
Chicago maize futures (Dec-19) have continued to drift sideways moving less than 1% from 13 to 27 September.
US maize development has remained behind average throughout the season due to the historically late plantings. The apparent wet weather will likely push harvest further behind too. US maize stocks are expected at near record highs currently, but today’s USDA grain stocks release is awaited to confirm this.
Argentina on the other hand is experiencing rather arid conditions as planting continues, this could slow development and limit crop potential if prolonged.
Physical delivered feed wheat prices gained £0.50-£1.50/t on the week dependent on delivery month and location. With harvest almost complete, small areas in Scotland are all that’s remaining, expectations remain of large cereal crops for the UK in 2019/20.
The lack of clarity around Brexit continues to pressure UK markets. Ex-farm sales have ramped up pre-November signalling a want to move grain before Brexit. Conversely, sales for movement in November and December are behind normal.
The falling value of sterling could help support UK physical prices but Brexit uncertainty will likely be an overriding driver of prices.
Global rapeseed supply remains tight for 2019/20. Poor weather across Canada could see lodging losses and delays to the canola harvest. Australian drought conditions persist hindering canola prospects.
Global soyabean stocks remain large. However, recent Chinese purchases of US soyabeans, about 600Kt, have offered some positivity. That said, trade talks remain overshadowed by little overall progress.
Global oilseed markets
Global oilseed futures
Later today, the USDA will publish crop stocks data that includes year-end US supplies of corn & soyabeans for 2018/19 season, which concluded 31 August.
A pre-report Reuters’ poll predicts US soyabean stocks at record levels, 26.72Mt, significantly above the previous record of 15.62Mt set in 2007. Although China are stepping up purchases of US origin soyabeans, this will not dent large old crop supplies.
The ongoing US/China trade dispute has significantly decreased US exports of soyabeans. Additionally, US export demand has been further reduced by Chinese purchases of South American soyabeans. Furthermore, Chinese soyabean demand has been greatly affected by the ongoing African Swine Fever epidemic. Rabobank now predict that China’s pork herd will have halved by the end of the year.
Argentina’s eastern regions have seen dryness concerns start to affect crop outlooks, with dry soils currently slowing corn planting. Some growers are reportedly increasing soyabean acreages instead.
UK delivered oilseed prices
Paris rapeseed futures (Nov-19) remained largely stable over the week before declining €1.50/t on Friday. Sterling declined against the euro last week, to €1.126 on Friday at 3pm. As such, UK delivered oilseed rape prices for November delivery rose £3.00 - £4.00/t, depending on the location.
Dryness in Australia has reduced the canola production forecast to the second lowest level since 2010/11. In previous seasons the EU has imported Australian canola so imports may need to switch origin (read more here).
A potential gap in imported oilseed rape supply could provide a bullish market sentiment to domestic rapeseed markets.