Monday, 8 July 2019
This week's view of grain and oilseed markets, including a summary of both UK and global activity.
Large global supplies and forecasts of good harvests are driving a marginally bearish feeling to the market at the moment. However, volatility from the maize market will drive daily movements.
There is an overall feeling of a well-supplied market, owing to large global supplies. However, the ongoing weather challenge in America for maize is driving uncertainty and volatility.
The UK barley area is forecast at 1.13Mha. The EU market looks well supplied and attention will be on the quality of western European and Scandinavian crops.
Global grain markets
Global grain futures
Wheat markets fell back last week with global wheat supplies still looking plentiful. The latest harvest report from the US Wheat Associates shows that while harvest remains behind average, quality is favourable. Furthermore, the Ukrainian wheat harvest is progressing well at 22% complete, with yields ahead of last year.
The wheat harvest has started in France, albeit in selected regions. The French wheat crop was not drastically affected by the recent heatwave. French wheat crop conditions still look positive, with 75% rated good or very good.
While the wheat market continues to look well supplied, the maize market remains uncertain. Chicago maize prices (Dec-19) gained 2.5% last week with markets remaining volatile.
US maize acreage and crop size is still uncertain. This will keep the market in a state of flux. The next point for clarity in the maize market will be the USDA crop production report on 12 August.
Last week’s AHDB Planting and Variety Survey estimates pegged the UK wheat area at 1.80Mha, up 4% on 2018 levels. If yields are average (8.3t/ha) UK wheat production could reach 15Mt. In that position the UK will be reliant on exports.
UK wheat exports are likely to be centred on southern Europe, with Spanish production feeling the pressure from the European heatwave. Competition into Southern Europe will likely come from Ukraine. Ukrainian feed wheat (FoB, August) is currently offered at £142.03/t. UK feed wheat (FoB, July) was offered at £156.00/t last week.
Global stocks remain large and the Ukrainian harvest is progressing well. The outlook for the EU remains tight. Harvest has now started and yields will be watch closely.
The global market looks well supplied for the 2019/20 season. Increased Chinese buying of US beans has supported markets, but the impact of African Swine Fever will cap demand.
Global oilseed markets
Global oilseed futures
Beneficial weather across much of the US has improved the potential for the upcoming soyabean harvest. Soyabean futures have been falling recently, having reached a high in mid-June amid US planting concerns. Chicago Nov-19 soyabean futures fell $10.47/t Friday-Friday.
Nov-19 soyabean futures still remain nearly $25/t above the lows in mid-May. Weekly net export sales of US soyabeans reached 868Kt in the week ending 27 June, including 544Kt of sales to China.
Large stocks of US soyabeans, improved weather conditions and African Swine Fever will continue to limit market gains for soyabeans and place a ceiling on EU rapeseed prices. As such, Managed Money funds have remained in an overall short position on Chicago soyabean futures, expecting prices to fall.
The next USDA supply and demand estimates are due on 11 July. Chinese demand and the prospects for new crop US soyabeans will be watched closely.
UK delivered oilseed prices
Paris rapeseed futures had a volatile week last week. New-crop futures (Nov-19) closed the week marginally down following US soyabean markets. With harvest underway in continental Europe, yields will be key to future market direction. In Ukraine, the forecast record harvest is now 30% complete with yields in line with last year.
The AHDB Planting and Variety Survey estimates the English oilseed rape area for harvest-19 at 483Kha, a 16-year low. In Scotland the area has reduced to a lesser extent, down 6% at 31Kha, suffering from less pest damage.