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Keeping an eye on the grain market - March 11 update

The recent firming of new crop could mark the start of the process to maintain adequate supplies. 

 

In the key French market, winter wheat crop conditions are seen rated 88% good/excellent, from just 64% last year. 

 

On Wednesday night soya prices in China and the US took a hit which some are calling a technical break. 

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Nov-21 LIFFE wheat futures closed on Wednesday March 10 at £170.75/tonne, a rise of £0.25/t on the week.

 

UK - Rising ethanol demand firms new crop market 

UK - Rising ethanol demand firms new crop market 

Tight supply and a dependency on imports continue to underpin UK old crop wheat.

Official estimates show 1.42 million tonnes of wheat was shipped into the UK between July and December. This would leave a further 700-800,000t to be landed during the second half of the season to balance the books, against a backdrop of tightening European supplies.

The recent surge in sterling has dampened the market to an extent. This has been mainly driven by the removal of Brexit uncertainty, as well as the remarkable pace of the Covid vaccination programme coupled with the Government’s recently released ‘roadmap out of lockdown’. Many observers believe the UK economy will kickstart considerably earlier than in many other countries.

New crop prospects have been boosted by the Government’s recent pledge to move to a greener E-10 (10% ethanol) fuel, which should be made available from September this year.

This should increase the requirement for home-produced ethanol and coincides with the announcement that Vivergo, the Hull-based ethanol plant, will recommence operations either late this year or early next year.

This plant and Ensus on Teesside have a potential combined annual requirement of 2mt of wheat per year. Such an increase could see the UK remaining a net importer of wheat next season, even with the expected sharp rebound this harvest.

The recent firming of new crop could mark the start of the process to maintain adequate supplies.

David Woodland, ADM Agriculture

 

Global - Revised global production estimates following latest WASDE report 

Global - Revised global production estimates following latest WASDE report 

The United States Department of Agriculture (USDA) published its March World Agricultural Supply and Demand Estimates (WASDE) update earlier this week and disappointed the market bulls.

 

By increasing its estimate for Australian wheat output by 3mt to a new total of 33mt, which is much closer to the recently revised estimate of 33.3mt from the Australian Bureau of Agricultural and Resource Economics (ABARES), the USDA increased world wheat production estimates to 776.78mt. However, this increase in estimated output was offset by a 5mt increase in Chinese feed wheat demand to satisfy the needs of rapidly expanding pig herds.

World wheat stocks were cut by 3mt to 301.19mt, with China accounting for about half of these stocks. Excluding China, world stocks are 1mt higher at 150.76mt, which is 2mt up on the year.

Corn production estimates for Argentina and Brazil were left unchanged on last month at 47.5mt and 109mt, respectively, despite trader concerns over prolonged dry weather in Argentina and rainfall in Brazil which delayed both soybean harvest and subsequent corn crop planting.

World corn stocks are now seen 1mt higher at 287.67mt, but this is still 15mt down on the year. Corn stocks outside of China will be 91.5mt; 11mt down on the year. It is this tighter supply picture that is helping to underpin world grain prices. South American weather and its potential impact on corn production from Argentina and Brazil remains a key market factor in the near term.

 

Simon Ingle, Frontier Agriculture


European - European spring conditions largely favourable 

European - European spring conditions largely favourable 

European grain prices slipped a touch last week, trending in-line with weaker global markets. MATIF wheat fell by 1%, maize by 0.3% and LIFFE wheat by 0.4%. Cash markets (France/Romania/Black Sea) were a couple of dollars lower, too.

 

With little change in the overall global supply and demand fundamentals, our regional grain markets were instead largely buffeted by international traders positioning their books either side of the USDA report on Tuesday.

 

Since the report provided little fresh insight, the market should return its focus back to spring planting conditions across the EU and Black Sea region. In the key French market, winter wheat crop conditions are seen rated 88% good/excellent, from just 64% last year.

 

In the Black Sea region, winter-sown crop conditions are reported to have improved considerably over the winter. In Russia, just 8% of the winter wheat crop is rated in poor condition, compared to 22% in November.

 

Russia is seen producing 76mt of wheat in 2021 - it produced 86mt in 2020 - but if spring and summer conditions are amenable, then this number may start to be revised higher in the weeks ahead. However, another cold snap is due in the next week and the main wheat areas have little to no snow cover.

Meanwhile, Algeria bought 650,000t, seen likely sold from France, at $323/t cost and freight. French ports are very stretched at present and some of this tonnage may be switched to the Baltics instead.

 

Saudi bought 660,000t barley, of which Australian supplies are seen dominating. But European barley works on paper into the purchase (including UK) and should get a slice of the pie.

Rupert Somerscales, ODA


Oilseeds - Brazilian soya harvest delay affects daily logistics 

Oilseeds - Brazilian soya harvest delay affects daily logistics 

Global oilseeds have continued on their positive run, with prices for most oils and meals reaching levels that most never expected to see. The global supply and demand for oils and meals relies on constant supply to meet an almost constant demand and the delay in the Brazilian harvest has thrown a reasonably large spanner in the daily logistics.

 

Harvest looks to be picking up but as of the last report just 37% of the crop had been harvested against 52% at the same time last year. Concerns over quality are also filtering through and the queue of vessels waiting to load will take some time to erode if the weather does not improve and allow harvest to speed up.

 

The increase in commodity prices is certainly going to focus US farmers’ attentions when it comes to planting decisions in the coming weeks. On Wednesday night soya prices in China and the US took a hit which some are calling a technical break.

 

Levels dropped to two-month lows as discussions around the latest outbreak of African swine fever in China may have encouraged some non-commercials to trade out of some of their speculative long positions.

 

The markets are very nervous and any reason for a correction from current high levels is unlikely to be ignored. The markets remain focused on supply while also eyeballing endless demand requirements such as many countries’ desire to increase the level of biofuels in diesel.

 

At some point the world will have to work out how much land really is available and the best thing to grow for the population and the environment but maybe price will also start to cap demand?

Cecilia Pryce, Openfield

 

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