Keeping an eye on the grain market - August 23 update

Sellers remain in charge of European (and UK/US) grain markets. Last weekMATIF wheat futures fell another €3/t, marking 10-day losses to about €8t.

In the UK losses were put at nearly £9/t over the same period, with UK wheat prices now trading at a remarkable £20/t below equivalent French values.

In their latest wheat tender, Egypt received offers from French exporters and on a FOB basis, were attractive. However, when the C&F freight component was added, prices were uncompetitive compared to Black Sea supplies, who duly won the tender.

The results indicate that continental wheats are nearly in position to gain vital North African export markets, which at such an early stage in the marketing season is an encouraging change from previous years, when Black Sea wheats have typically dominated sales during the first half of the season.

Russian wheat export tonnages are lagging previous years as farmers hold back their generally good quality supplies from the export channels in anticipation of higher prices ahead.

Rupert Somerscales, ODA

Global wheat prices have continued to erode as large-scale supply competes with limited demand.

The fall in Black Sea and EU wheat prices continues to provide resistance in the US markets, despite exports from the US running 25 per cent ahead year-on-year.

Northern hemisphere wheat crops are almost made. Good yields are reported, although quality issues are increasing, especially in parts of the EU where excessive rain fell as crops matured and during harvest.

Focus is now switching to the southern hemisphere. Australia’s crop is described as being on a knife-edge due to a general shortage of rain, but Argentina is forecast to cut a record crop, and prices have benefited from the recent currency devaluation.

The bearish US corn report issued by USDA earlier this month has resulted in strong selling, driving prices lower. This is seen as a negative to wheat, as cheap corn competes directly with wheat into food, and animal feed diets.

In summary, wheat continues to drift lower trying to find demand, but harvest yields suggest the reality of an ‘oversupplied’ market will continue to weigh on prices, unless additional domestic or international demand is very quickly turned on.

David Woodland, ADM Agriculture

New week and new high for EU rapeseed futures prices amid a reduced 2019 EU crop, which will require record imports of the oilseed this season and has resulted in rapeseed oil prices at its highest level in Rotterdam since November 2017.

The latter is also attributed to the recent EU decision to increase tariffs on Indonesian palm oil.

As of August 11, the European rapeseed imports were already 13 per cent higher than a year ago at 227,000t whilst the busiest months of the EU import season remain September and October, accounting for more than 20 per cent of the annual total on a five-year average.

The low soyabean pod counts and the delayed maturity of the US crops reported from the 2019 ProFarmer Midwest Crop Tour which kicked off at the beginning of the week were also underpinning oilseed prices.

Medium-term though, the ongoing US-China trade tensions, the decimating African swine fever virus spreading in South East Asia curbing soya demand and the weakness in South American currencies (Argentine peso and Brazilian real) are difficult to ignore and will continue to cap any rally in price, particularly for soyabean, which currently trades at a $100/t discount to EU rapeseed.

James Bolesworth, CRM AgriCommodities