What to watch: Consumers need to stay on their toes to help oilseed growers identify who their real buyers are and what external influences to be aware of.
A positive week for UK wheat as prices peak at the highest level since before harvest.
In Europe, old-crop purchases are lined up for a substantial stock-build as international players focus on their own harvest.
And ongoing drought issues contribute to a 20-year low for global crop ratings.
Nov 18 LIFFE wheat futures closed on Wednesday April 11 at £146.70/t, a rise of £0.70/t on the week.
The UK wheat market closed another week with higher prices, ex-farm prices now at their highest level since before harvest.
Continued strong demand from the industrial and animal feed sector is the key driver. Recent official data confirms this.
The volume of wheat used in the compound feed sector between July and February stood at record levels; being 2.7 per cent ahead of last year’s then record pace.
Compounders’ use of barley in their rations is up a staggering 25 per cent on last year, which partly explains why the feed barley discount to feed wheat this year is so narrow this season.
The price gains have maintained the UK at import parity, suggesting additional domestic price gains will likely emanate from either positive price developments overseas or favourable currency movements. The former of these is probable, while the latter is anyone’s guess.
New crop prospects have come under closer scrutiny in recent weeks as saturated fields and cold conditions threaten to reduce yields and hamper spring sowings.
Drier and warmer weather is forecast for next week, but time is starting to run out to meet even average yields on a national basis. A reduced yield/production scenario implies a marketing year ahead where import parity will be key.
Rupert Somerscales, ODA
Since our last European report, markets have eased, and then firmed as concerns grow regarding winter crops and significant delays to spring plantings.
Supported by a firmer Chicago market, prices have edged higher, also gleaning support from rising Russian prices.
News from the Black Sea region is all about the recent demise of the rouble, which yesterday fell to a 16-month low, lifting prices at a time when exporters continue to source grain for export.
USDA recently trimmed its EU wheat export projection by 1m/t, to 24m/t, although given the current pace this still remains 3-4m/t too high.
With the marketing season closing at the end of June, it is unlikely that the main international players will ramp up old-crop purchases heavily, as their own harvests are only a matter of a few weeks away.
This leaves the EU facing a substantial stock-build, a realty that USDA remains reluctant to declare, posting the drop in exports straight into feed usage.
New crop prospects remain favourable for winter crops, although the recent onslaught of heavy rain across much of western Europe is not only preventing farmers from sowing spring crops, but also from applying treatment and fertiliser to winter crops.
With the optimum spring sowing window closing, the likelihood is that growers on the Continent may switch away from spring grains and into maize, which can be sown late.
David Woodland, Gleadell
US wheat has rallied back to four-week highs, supported by ongoing weather issues. Winter wheat crops in the West plains are stressed after ongoing drought conditions, with no significant rain in the forecast for the next two weeks.
Crop ratings released this week have fallen another two per cent, reaching 20-year lows at just 30 per cent good to excellent versus 53 per cent this time last year.
On top of this poor weather for spring wheat areas is also in the frame, causing delays to spring drilling which is currently two per cent complete versus an average of six per cent at this time of year.
The Spring wheat areas of Minnesota, Montana and the Dakotas have had heavy snow fall, with around seven inches reported to be covering over 90 per cent of the ground. If bad weather continues, farmers could potentially switch out of spring wheat into soybeans, resulting in a smaller wheat area.
Southern Hemisphere weather is also key as their main drilling window approaches; Argentina has a good amount of rain in the forecast this week which will be needed to replenish soil moistures after a six-month period of dryness. Australia on the other hand remains dry, apart from a few showers in the East.
This week’s USDA report was uneventful for wheat markets, making only small changes to the supply and demand. It did however increase global wheat stocks to 271.22 million tonnes, a new record high.
This is a reminder that without ongoing weather issues, the fundamentals of supply and demand still paint a bearish picture.
Zoe Andrew, Frontier
Oilseed markets are still absorbing daily news that seems to endlessly push buyers and sellers around in circles.
Crop sizes fluctuate, buyers choice of commodity, oil and meal varies daily and if you add a good dose of weather, biofuels policy and talk around international trade disputes you can understand why frustration may start to settle in for many traders.
The true fact is that there are probably enough global oilseed crops to feed consumers demand but the challenge now is to find the cheapest for every individuals needs and anticipate when and if anything else can throw a spanner in the works.
Will there really be a trade war or just a redistribution of trade? Will China substitute canola for soya and if so from whom?
Closer to home in the UK the usage of meals has varied dramatically in the last year with increased demand for sun meals while reducing soya.
Is it price or consumers change in requirements and will palm oil continue to be a commodity associated with ‘unfavourable environmental’ concerns by many?
Either way price will ultimately change flows and consumers will need to stay on their toes just as much as growers who will have to identify who their real buyers are and what external influences they will still have to be aware of.
Cecilia Pryce, Openfield