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An eye on the grain market - December 21 update

What to watch: European grain markets will be watching Friday’s meeting between the Russian government and exporters

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An eye on the grain market - December 21 update

World wheat prices show festive spirit

 

UK prices reached a near two-month high last Friday on the back of rising global prices

 

China has been stepping up purchases of US soybeans, although recent reported trades still place annual sales well below normal levels


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May 19 LIFFE wheat futures closed on Wednesday, December 19, at £178.90/tonne, a rise of £1.05/t on the week


UK - Wheat hits a near two-month high

UK - Wheat hits a near two-month high

In the wake of rising global prices, UK wheat reached a near two-month high of £181/tonne last Friday on May-19 LIFFE feed wheat contract before consolidating and falling back below the psychological £180/t threshold.

 

The weakening sterling continues to lend support to domestic values whilst the spread between LIFFE and Matif (Paris contract) wheat has dropped from +£10/t (UK wheat over) in September to -£10/t, its lowest since July 2017 on a continuous chart basis.

 

This implies that the UK may end up exporting (slightly) more than expected in 2019 whilst on new crop, Nov-19 LIFFE feed wheat posted a five-week winning streak. It is noteworthy that the gap between old crop May-19 and new crop Nov-19 remains at a relatively high level of £16/t (new crop over) against less than £5/t last year.

 

The correction in wheat prices also comes after a near 5 per cent rally over the last six weeks and profit taking seen on both Chicago and Matif ahead of the Christmas holiday.

 

Additionally, UK maize imports remain historically strong with more than 772,000t imported so far this season between July and October vs 667,000t last year and 537,000t on a five-year average according to HMRC data. For wheat, the UK is still a net importer of wheat so far this season (July-October) with just 102,000t exported and 907,000t imported.


Conditions for the 2019 harvest have continued to improve, from mild temperatures and beneficial moisture which translate in high vegetation density.

 

The CRM Agri Team would like to wish you a Merry Christmas and a prosperous New Year.

 

Benjamin Bodart, CRM AgriCommodities


European - Anticipation around Russia’s meeting with exporters 

European - Anticipation around Russia’s meeting with exporters 

The focus in European grain markets is turning to Friday’s meeting between the Russian government and exporters. With the fast pace and high volume of exports from Russia so far this year, any decisions in this meeting could affect prices in Europe.

 

As we enter into the winter period, crop conditions will be closely monitored. Russian and Ukrainian crops are in good condition but Romania, in particular, has had a very dry autumn.

 

Analyst, Strategie Grains, reported that EU wheat production is expected to jump 16 per cent to 147 million tonnes following the recent rain across most regions which has significantly helped the autumn drilled crops.

 

Andrew Hill, Frontier


Global - World wheat prices jingle

Global - World wheat prices jingle

World wheat markets showed more than a hint of the festive spirit last week, with gains noted across most of the world’s key markets. Russian milling wheat export prices jumped $6/t, while its domestic feed wheat and flour prices also rallied.

 

In turn, Egypt purchased supplies at the highest average price all season, some $5 above its previous purchase price. In Europe, French wheat futures added €3/t, UK domestic values £3/t and German A grade €7/t.

 

In the Americas, US SRW wheat futures added $7 and Argentina’s numbers are currently trading around $10 higher. Prior to these gains, on paper, US, French, Ukraine and Argentina could all have posted offers to Egypt within $3 of each other.

 

While tightening supply and demand global fundamentals are clearly the root cause underpinning values, adverse winter growing conditions across eastern Europe and reports that the Russian government is set to meet its exporters again on Friday, with a view to slowing exports further, are helping to maintain the immediate bullish sentiment.

 

For maize, Ukrainian prices rose by €1/t last week, but remain over €15/t cheaper than equivalent French supplies delivered to Rotterdam.

 

Unsurprisingly, Ukrainian maize continues to flood into the EU, dampening demand for EU-origin wheat into the animal feed industry.

 

Rupert Somerscales, ODA


Oilseeds - Chinese buying underpins soybean markets

Oilseeds - Chinese buying underpins soybean markets

Soybeans have firmed during recent weeks. Positive vibes emanating from the Trump/Xi Jinping meeting have resulted in China stepping up purchases of US beans, although recent reported trades still place annual sales well below normal levels.

 

Chinese crush margins, albeit slightly higher on the week, continue to reflect losses as the country struggles with lower feed demand and abundant supplies of beans.

This, plus the continued efforts of the Chinese authorities to source other alternatives to US beans, remain as negative factors.

 

South American premiums have risen. Weather concerns and firmer export prices did little to encourage any selling reaction from Argentine farmers, although selling remains brisk in Brazil, where analysts put the crop close to 122mt.

 

MATIF rapeseed closed lower, although well off the lows. Firming CBOT values and a fresh 18-month low in the value of the Can$ halted recent declines in Canadian canola.

 

Asian markets have all traded higher in recent sessions, supported by the Malaysian palm oil market, which hit an eight-week high, despite the recent demise in crude and energy markets.

 

In summary, while the threat of increased tariffs being imposed remains, further Chinese buying interest should keep the market underpinned.

 

David Woodland, Gleadell

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