Monday, 5 August 2019
This week's view of grain and oilseed markets, including a summary of both UK and global activity.
Large crops expected in the EU, US and Ukraine. However, weaker sterling combined with downward revisions to Russian and Canadian crop expectations offer some support.
Improved US weather outlook and large Black Sea crops pressuring prices. Uncertainty remains as to the size of the US crop area, next week’s USDA report will be watched closely.
A well supplied domestic market and uncertain trade outlook beyond the 31st October will continue to dictate a largely bearish feel to barley markets.
Global grain markets
Global grain futures
US grain markets lost significant ground last week on the back of an improving weather outlook, significant strengthening of the US dollar and a worsening of the trade relationship between the US and China.
Last week’s USDA crop progress report showed little change to crop conditions for wheat or maize. Growing conditions over the past week were largely “normal”, and look set to continue in the same vein this week. As such crop conditions are unlikely to have deteriorated, this has left markets drifting lower.
UK and EU markets were insulated against the fall in US prices by the falling value of sterling and the euro relative to dollar.
The French soft wheat harvest was 87% complete in the week to 29 July, with conditions unchanged on the week. The Ukrainian winter wheat harvest was also 87% complete at 1 August, yields are reportedly up 30% year on year at 4.6t/ha.
The UK barley continues to look large. The first UK harvest progress report released on Friday showed that the UK winter barley harvest is 49% complete, with yields reportedly looking very good. With export markets potentially limited beyond 31st October, a large crop could pressure prices in surplus regions like the South and East of England.
Full season cereal usage figures were released last week. Barley usage in Compound and IPU feed production was up month-on-month in June. Maize usage reached 652Kt last season, 88.2% up year-on-year. Animal feed and human and industrial cereals usage figures are available online.
Disappointing UK yields were confirmed by the UK harvest report last week. EU production prospects remain equally poor. Weakening sterling will continue to offer support to UK prices.
The US-China trade war persists. With Trump threatening further tariffs and reports of China halting imports of US products, old-crop stocks remain heavy. Good US weather also improves new-crop prospects.
Global oilseed markets
Global oilseed futures
Bearish news in the US has pushed soyabean prices down last week. Chicago soyabean futures (Nov-19) lost $11.94/t to close Friday at $319.09/t. News that trade negotiations between China and the US over import tariffs had worsened, raised major concerns about US old-crop movements.
With US old-crop soyabean stocks set to remain high due to a lack of imports from China, the beneficial US weather for new-crop growth also pressured the market.
The expectations of large soyabean availability pressured technical selling, increasing the net-short positions of Managed Money funds in Chicago soyabean futures.
Oilseed rape production forecasts for the Black Sea region remain high. However, disappointing yields during early harvest were seen in Ukraine, reducing crop expectations. Later prospects improved but the crop is still smaller than first expected (oilworld.biz). Ukrainian and Russian OSR will be required to fulfil some of the shortfalls within the EU.
UK delivered oilseed prices
Paris rapeseed futures closed at €374.50/t on Friday, dropping €4.00/t week-on-week. Although UK production prospects remain unchanged based on last week’s harvest report, German and French prospects are lowered (oilworld.biz). According to Reuters, French rapeseed production forecast could be 32% below the five-year average.
UK oilseed rape prices (delivered Erith, Nov-19) jumped £5.00/t on the week, to reach £346.50/t on Friday. Much of the support for UK physical prices came from weakening sterling. On Tuesday (30th July) sterling dropped to its lowest value against the Euro since September 2017.