What to watch: UK prices to continue to be impacted by currency, politics and a reportedly large crop
The recent weather has made harvest a struggle for many in the UK.
UK prices were now trading at £20/tonne below equivalent French values.
And rapeseed reached fresh contract highs.
Nov-19 LIFFE wheat futures closed on Wednesday, August 7, at £143.20/tonne, a fall of £4.05/t on the week.
No two years are ever the same in the grain industry and this year is proving to be no exception.
The recent weather has meant harvest is still a struggle for many in the UK, especially with regard to moisture levels, which are also leading some to be over-enthusiastic about yields.
The excessive imports of wheat and maize at the end of last season have left most consumers in no hurry to purchase just-harvested commodity and, as such, farmers who have had grain that needs moving have sometimes struggled to find a destination and ‘acceptable’ price.
Ports are busy as UK wheat and barley remain export price competitive, but the real uncertainty still surrounds the UK crop's quality profile. The laboratories are flat-out, but it would take a brave person to second guess how wheat currently in the field will perform when finally cut.
UK prices will continue to be impacted by currency and this year will be an education for us all as we deal with global and local macro issues, along with what seems to be a reasonably large crop – if we believe Defra’s June survey data.
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.
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.
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.