Monday, 9 September 2019
This week's view of grain and oilseed markets, including a summary of both UK and global activity.
Global wheat prices received support last week as China and the US agreed to resume trade talks. However, US funds returned to a net short position, expecting markets to fall again.
Beneficial weather for US maize production continued to pressure prices. Further, disappointing US trade data added additional pressure to Chicago futures, and funds further extended their net short positions.
The EU Commission has raised its 2019/20 production forecast to 60.5Mt up 0.8Mt from last month’s estimate. This would be the largest crop since 2015.
Global grain markets
Global grain futures
Continued forecasts for beneficial weather in the US added further pressure to maize markets. With maize planted later than usual, owing to the spring rainfall, the potential for frost damage was heightened. However, with long range forecasts pointing toward a warm September, this risk is being reduced.
Further, disappointing US trade data added additional pressure to Chicago futures. In response, US funds further extended their net short positions in both maize and wheat futures, expecting markets to fall yet further.
With the majority of the Northern Hemisphere grain production harvested or weeks away, weather conditions in the Southern Hemisphere will become of increasing importance.
Warm and dry weather in Brazil is forecast to persist, with low soil moisture in both the south and south east regions. With little rainfall forecast, and the planting of the first maize crop imminent, Brazilian weather will become increasingly influential for global grain markets.
UK wheat futures gained last week, against the pressure of a strengthening pound, gaining 0.6% against the euro and over 1% against the dollar.
Having received support from a bounce in global markets, UK feed wheat futures rebounded further than both European and US wheat futures. Yet with the price discount to Paris milling wheat futures narrowed, UK feed wheat futures will likely come under pressure again this week.
The first provisional Cereal Quality Survey results for harvest 2019/20 are now available. First estimates suggest that quality is similar to last year. However, with latter harvest grain with potentially lower Hagbergs not represented, quality may deteriorate.
EU production is now forecast by Strategie Grains to reach just 17Mt, further compounding rapeseed tightness. However, cheaper Canadian seed may limit the upside for prices.
Larger than expected sales of US soyabeans to China offers some support. However, large global supplies and weak new crop demand is keeping prices subdued.
Global oilseed markets
Global oilseed futures
Soyabean prices fell last week despite larger than expected sales of US beans to China. Greater than expected exports in August offered early support for prices. However, the weight of global supplies and limited new season US soyabean export sales have continued to cap the market.
US sales of new crop soyabeans stand at just 6.4Mt, significantly below last year’s level. Moreover, the improved outlook for crop development will likely add pressure to markets. Temperatures in the US appear warmer over the next fortnight, negating any risk of frost damage for the crop.
The area planted to soyabeans in Brazil is expected to increase by just 1.1% (AgRural), compared with the five year average increase of 3.5%, the smallest season-on-season increase for 13 years. The reduced increase has been driven by the weak price outlook. That said with the area increasing nonetheless, production is expected to eclipse the previous record of 122Mt (2017/18).
UK delivered oilseed prices
Paris rapeseed futures (Nov-19) firmed last week to €382.75/t, a rise of €1.75/t. The move higher comes as Strategie Grains cut their forecast for 2019/20 rapeseed production in the EU to 17Mt.
With tight production in the EU, supplies from Ukraine, Canada and Australia will be more important this season. So far this season (week ending 1 September) EU imports of OSR from Ukraine and Canada totaled 877Kt and 115Kt respectively.
UK delivered OSR (Erith, Nov-19) fell £3.50/t on the week, quoted at £345.50/t. The move lower was driven by firmer sterling and limited demand for domestic seed.