What to watch: Oilseed markets will be watching imports into the EU from Australia with interest over the coming months
UK wheat prices have fallen sharply this week
But even steeper falls have been seen across the channel in France as the market comes under pressure
World wheat markets started weakened led lower by the US CBOT wheat futures with the US failing to secure sufficient trade to help them meet export targets
May 19 LIFFE wheat futures closed on Wednesday February 20 at £164.35/ tonne, a drop of £8.15/t on the week.
UK wheat futures fell sharply over the last week, weighed by even steeper declines across the Channel. As such, the price spread between UK and French wheat futures has narrowed sharply.
The French wheat market is under significant pressure as questions are asked about her remaining [large] exports for the season and her hitherto lack of competitiveness into N. Africa.
The losses pushed prices through a significant support line that has held for many months. Meanwhile, UK cash basis levels remain very strong, suggesting ongoing demand from end-users in our domestic market.
New crop UK wheat futures have not been pressured to the same extent, albeit nurturing £4/t losses last week.
With so much uncertainty over the Brexit outcome and what the implications will be to tariffs and the value of the pound, there are many nervous players in the market. In the bigger picture, the UK 2019/20 wheat fundamentals appear relatively benign, with total supplies seen at similar levels to total demand.
This, in contrast to the current season, where imports are likely to be three times the volume of exports.
Despite the steep wheat price decline of late, animal feed compounders are expected to look more favourably at barley inclusion rates in the coming weeks, since the spread with feed wheat has widened considerably.
Global pressures dragged European wheat down to a seven-month low on Wednesday, when the market traded at just €4/t above the yearly low set in February 2018.
The weakness comes despite a big vessel line-up in France and recent trades to Algeria and Egypt, both of which secured mostly French wheat.
The market has been pulling demand away from Russia, although this is still yet to show to any great extent in the EU export figures, which are reported down 20 per cent year-on-year.
The fall in exports from Russia is due to escalating domestic prices, which have seen Russian wheat switch from being the cheapest to one of the most expensive sources in the world.
The likelihood that carryout stocks will be greater than anticipated is adding to the current pressure on values. With favourable weather increasing the prospects for a rebound in both EU and Russian production, harvest supplies again could be burdensome.
Today sees another Egyptian tender and pundits predict that France could take the majority share of any purchase.
World wheat markets started notably weaker this week, led lower by the US CBOT wheat futures that dropped to a 13-month low yesterday.
The US is failing to secure sufficient trade to help them meet export targets and they need to be more competitive. This was highlighted by recent tenders where both Syria and Bangladesh opted for Black Sea wheat buying 200,000 tonnes and 50,000t respectively.
French wheat futures followed and fell to prices not seen since July despite an improvement in the EU export pace. Markets are also noting upbeat estimates for 2019 wheat production.
One optimistic analysis saw Russia potentially reaching 80mt which would be their second ever largest wheat crop.
However, recounting last season’s experience of prolonged dry hot spring weather there can be a big difference between expectation and reality.
The unusual current dry spell is extensive across Europe and North Africa and is of some concern. Temperatures will be notably higher than average which has been indicated by those in Spain where it is expected to reach 25°C this week.
Global Oilseed markets continue with the great uncertainty around trade talks.
With the US export and trade data playing catch up on Friday, matched with the threat that there may be some announcement around China/US trade negotiations before the 1st March deadline, it leaves markets largely in a void.
Ultimately the supply and demand of products in individual countries will be important for domestic farmers. Prices of OSR in the UK have eroded most of any forward price carry are now almost flat between spot and new crop.
This alone could discourage farmers from selling anymore on the nearby, especially with prices well off-season highs.
The interesting thing to watch in the coming months will be the imports into the EU from Australia. Even with the reported smaller 18-19 crop of 2.241mt versus 3.668mt in 17-18 Australia will still have tonnage to export and ships are already heading to the EU.
This may just be enough to keep a lid on prices when matched with the strong soybean import number and various issues being experienced with Canadian canola in some destination countries.
New crop EU OSR area and crop prospects remain uncertain but so does the demand side which may just put the focus firmly back to soybean planting and crop prospects to lead any fundamental market price move.
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