What to watch: It could be the calm before the storm in global markets, with weather concerns in key production areas mixed with potential trade wars and geopolitical risks
The UK could be looking at another season as a net importer with limited export opportunities if Defra data on crop size is correct.
Wet weather across Europe has provided relief for crops.
And the strength in the US dollar has helped breathe new life into European rapeseed markets.
Nov 18 LIFFE wheat futures closed on Wednesday, May 9, at £152/tonne a rise of £0.1/t on the week.
The UK old crop market remains underpinned by end-user and merchant short covering, amid limited offers coming from either farm level or trade longs.
Data released by Defra recently showed, based on farm area payments, that the English wheat area sown for the present season may have been 45,000 hectares lower than previously officially reported.
The impact of this would be a reduction in the 2017 crop size, of some 360,000t, which if correct, constricts not only this season’s balance sheet, but also greatly reduces the carry-in stocks for the 2018-19 marketing season.
Looking towards new crop, ex-farm prices have been supported by a firmer global market and from a fall in the value of the UK pound, as the likelihood of a May interest rate hike diminished following UK inflation data. In addition, the ongoing saga of Brexit, according to the Bank of England, is providing mixed economic data which could delay the timing of any increase.
In summary, global weather and politics (currency movements) are having a strong say in current UK pricing. No doubt the UK situation seems tight, although we may witness an increase in the level of imports over the next few months, as the rise in UK values places the UK at import parity.
New crop is all about the weather from here on in, but if the Defra data is correct, and the 2017 crop was lower, the UK is already looking at another season (2018-19) as a net importer, with limited export opportunities.
Matif wheat futures have moved higher, with the euro touching fresh lows for 2018. The weather forecasts have changed, showing a wetter outlook for France and Germany over the next 14 days.
There is also a more favourable forecast for the Black Sea, with rain promised for Ukraine and a wetter outlook for much of Russia which will help to alleviate recent concerns that it has been getting too dry.
Last week, the Food and Agriculture Organisation released its latest global cereals report which predicts a 1.6 per cent reduction in global cereal production in 2018/19 against the near-record harvest of 2017.
Within this, they expect Russian wheat production to be down 9mt and foresee falls in production in the EU and India.
It has been a week of consolidation for wheat prices, with new crop Dec-18 Chicago wheat down 3.7 per cent after reaching its highest since last summer on Thursday (May 3).
After a few years of clement conditions, Mother Nature has started to take revenge: the Kansas winter wheat crop is set to be the lowest in nearly three decades, while dryness concerns emerged in recent weeks across the Black Sea, in particular eastern Ukraine/southern Russia.
A similar story has made the headlines in the spring wheat-producing regions of the northern states of the Plains and the Canadian Prairies as dryness continues to intensify.
In the Southern Hemisphere, the second corn crop in Brazil has already been negatively impacted by the lack of precipitation during the flowering period.
As such, many analysts have already cut their total corn production forecast to 82-84mt compared to a hefty too optimistic 92mt crop by the USDA in April.
The US agency will continue lowering its estimate in its forthcoming WASDE reports. In Argentina, heavy rainfalls following a historic drought continue to reduce further the size of the soybean harvest, while Australian farmers face near/record lows soil moisture during plantings.
When trade wars and escalating geopolitical risks are added into the mix, then a storm could well be in the offing.
US soybean plantings picked-up pace over the last week, although forecast cold and wet weather is providing imperfect conditions. Should the growing season here prove uneventful, however, then US 2018/19 soybean ending stocks would likely be more than substantial.
Added to this potentially bearish oilseed feature is the ongoing trade spat with China. Chinese April imports are some 14 per cent lower already than last season.
Elsewhere, Argentina's soybean production continues to be lowered by analysts and heavy rains is now adding to harvest delays.
Australian canola crops have benefited from recent rains and crops have mostly germinated. Forecasts for the next fortnight suggest more dry conditions. Watch this space.
The US dollar has been on a tear in recent weeks against both the euro and pound. This, following many months of dollar weakness which has helped keep continental and UK rapeseed prices under pressure.
The reversal in the dollar's fortune has helped the Euronext benchmark rapeseed futures price recover over €10 in a fortnight, breathing life again into the UK cash rapeseed market. At home, crops are looking patchy, depending on region.