What to watch: Weather issues remain a watchpoint with conditions in Canada, Argentina and Australia still being monitored
UK wheat recovers and remains at its highest since the 2012/13 campaign.
France could miss out on what was almost historically guaranteed business to Algeria if Argentinean and Russian prices and quality continue to compete.
Global wheat markets lifted midweek after the Russian agriculture safety watchdog warned of the potential temporary suspension of 30 grain loading points.
May 19 LIFFE wheat futures closed on Wednesday, October 3, at £182.95/tonne, a rise of £0.15/t on the week.
Despite a fall in price since August, Nov 18 LIFFE feed wheat futures contract settled higher for a third consecutive quarter, up 8 per cent in Q3 or up 25 per cent since the beginning of the year.
Of course, world fundamentals and, in particular, the Russian rhetoric is lending support but domestic wheat stocks at their lowest since 2013/14 and the fragile sterling are also very good reasons for the rally.
On the physical market, after two weeks of consolidation, UK wheat prices pick up and range between around £165 in the eastern/southern regions of England up to £175 in Scotland, therefore still the highest since the 2012/13 campaign when wheat was trading closer to £190/tonne.
The ongoing drought has led farmers to push back as much as possible their winter wheat plantings to tackle the widespread black-grass issue while winter barley sowings are underway in very dry top soil condition.
The less than £7/t spread between feed wheat and feed barley is a very compelling feature of the UK grain markets as it would imply that maize imports could rise very rapidly over the next few months. As it stands, it is the lowest level in eight years for this time of the season and compares to a five-year average of nearly £14/t.
Malting barley premiums are also on the rise, standing above £40/t nationally compared to around £20/t on a five-year average. There is simply not enough ‘good stuff’ this year not just in the UK but in the rest of the world.
Rapeseed crops, when emerged or not decimated by flea beetles, have highly benefited from the recent showers, although it continues to struggle in many locations due to the drought, with farmers having made the decision to reduce their planted area to avoid inevitable crop failure.
European markets continue to monitor trade with interest. The weekly data published by Brussels is causing many to question its accuracy, especially when vessels arrived does not match declared numbers. Are we importing more and exporting more?
Either way individual EU member states are crunching data and trying to work out what they have too much or too little of, and how big their respective domestic grain maize harvests will be.
Price of wheat domestically continues to come under scrutiny, with many schools of thought worried that France will miss out on, what was almost historically guaranteed business to Algeria if Argentinean and Russian prices/quality continue to compete.
Invisible barriers to trade are the plague of every shipper and many know that what works on paper does not ship in reality. The world is a small place, but one missing document and the wheels can fall off very quickly and create a very large financial hole.
EU markets will keep assessing animal feed demand while looking at current drilling conditions for winter crops.
Conditions vary across the EU 28, but with the uncertainty surrounding Brexit many importing members may start to wonder what price UK wheat and barley may cost this time next year.
January will also see the opening of the new season TRQs which should create a reasonable demand for Ukrainian wheat early in the New Year unless domestic values fall to price even more intra EU demand.
Lots to keep an eye on and maybe looking closer to home will prove more lucrative than watching and worrying about the global buyers.
Global wheat markets lifted midweek after the Russian agriculture safety watchdog, Rosselkhoznadzo, warned of the potential temporary-suspension of 30 grain loading points in two of its top export regions – Krasnodar and Rostov.
It is rumoured that these elevators could cease loading for 90 days due to issues with phytosanitary certificates. These are the documents that confirm a vessel is clean of certain weed seeds and contaminants.
It is not yet clear if this news has been confirmed or whether it is an unofficial attempt to slow exports but it served to boost wheat markets immediately after the news broke.
As well as the above, weather issues remain a watchpoint, with conditions in Canada, Argentina and Australia still being monitored.
Snow in the Canadian Prairies is delaying harvest, as well as impacting the quality and yields of later crops.
Argentina is starting to suffer from drought and this week heavy frosts have raised further concerns at a critical stage for developing wheat plants.
Australia officially had the driest September on record.
Although it is now getting some welcome rain, in most parts the damage has been done with some winter crops having failed. Local estimates for production range from 15-17 million tonnes.
Last week’s US quarterly stock report was deemed bearish for soybeans, with figures higher than trade expectations, mainly due to an upward revision in the 2017 US crop.
However, after the weekend’s agreement with Canada to rejoin the revamped NAFTA, the losses sustained last week were given back as the agreement was deemed positive for US bean exports.
Soymeal prices have firmed recently as export offers from Argentina slow, with the increases in export tax imposed by the government to aid the ailing economy seen reducing potential shipments. This in turn has helped to support the US crush and soy oil prices.
Canadian canola has also firmed, primarily on the stronger US bean market, but also on the ongoing difficulties posed by widespread snow and cooler temperatures across the Prairies. In addition, the driest September on record in Australia is seen as potentially lowering its canola crop.
Malaysian palm oil has also bounced to a two-week high, helped mostly by the surge in energy markets, and with both Brent and crude oil at new rally highs.
The bottom line remains the ongoing trade dispute with China. Without a deal, the US soybean supply is heading towards a surplus of 900m bushels.
Traders are also talking higher bean yields as harvest progresses. All this makes a real or sustained rally near impossible, and in turn, makes new crop beans prices look very attractive for the US farmer.