Keeping an eye on the grain market - September 26 update

Prospects are improving for European crop and, as final crop estimates are increasing on a monthly basis, so too is export pace out of the bloc. French wheat has seen itself priced competitively against Black Sea origin wheat and is therefore gaining traction with North African importers after a slow start to the export season.

Rains have finally arrived for western Europe, which will help plantings, although not soon enough for maize, while soil conditions remain too dry in Ukraine.

James Bolesworth, CRM AgriCommodities

World wheat prices remain in the doldrums, being unable to find a materially bullish fundamental element that could spring values higher. With few Northern Hemisphere grain crop problems having eventuated this summer, the world balance sheet remains well supplied.

Adverse climatic conditions in Argentina and Australia may curb production further in the coming weeks and crimp world wheat stocks a touch, but the reality is that the Northern Hemisphere crop is king over the South and global wheat stock levels are likely on an upwards plane this season, rather than on a diminishing trajectory. On a global basis, this is not a positive price element.

In the US, market attention is increasingly focusing on how the very delayed corn harvest is progressing and which of the current wide-ranging US corn production forecasts will hold true.

So far, 7 per cent of the national crop has been cut, largely from southern states.

Very early yield results from here are not particularly encouraging and crop conditions are still significantly worse than last year.

With the speculative trading community holding a net short corn futures position and cash basis levels already demonstrating a scarcity of supplies (elevated), there may be room for corn prices to move higher over time, should yields not meet the higher-end forecasts.

Rupert Somerscales, ODA

Supporting the market this week, EU 2019/20 oilseed rape production has been revised to 17mt, down from 17.5mt one month previously. This is largely due to lower than expected yields in Germany and France, though the Baltic states have performed better.

Alongside this, Australian canola production estimates are reducing following prolonged dry weather through spring.

Although ex farm oilseed rape (OSR) prices remain well above the five-year average, the recent rally in sterling is forcing values lower this week. A stronger sterling continues to be the biggest risk to the OSR price for the UK farmer and, with no sign of Brexit resolution, the OSR price will remain volatile.

Elsewhere, Canadian origin canola is struggling for homes.

With Chinese demand now absent (China was previously taking 40 per cent of Canadian production) and large stocks carried over from last year, prices are falling. Harvest is underway and reports show significant farmer selling in this heavy market.

Andrew Hill, Frontier