What to watch: The updated US planting report due out at the end of the month may give more clarity on how much spring crop area has been lost
UK receives the rain many were praying for but amounts in some areas ‘almost biblical’
USDA drops corn forecasts in latest report
European grain markets have tried to gravitate lower over the last week, but firmness in Chicago’s markets have provided a counterbalance
Nov-19 LIFFE wheat futures closed on Wednesday June 12 at £151.85/tonne, up 0.70/t on the week.
UK Grain markets have had another uncertain week.
The rain, which many were praying for, has been well received by most but the amounts in some areas have been almost biblical and left several fields in a weather-beaten way.
Crop numbers and planted area for the coming harvest continue to be a talking point as the trade and farmer alike start to see the divergence caused by using Basic Payment Scheme area data or the new Defra 2018 area as a starting point for 2019.
Old crop markets are also causing some fun, with nobody 100 per cent certain there will be enough domestically to get us through to harvest.
New crop values are pushing to find export demand and all eyes are still on the US as the world tries to work out how a smaller maize crop will ultimately affect trading patterns.
The price of imported corn is currently keeping most UK consumers focused on wheat or barley for new crop, but we all know how quickly this could change and how much of an appetite they can have for corn if given the opportunity.
The latest trade data for April continued to show an unprecedented amount of maize arriving in the UK which could ultimately culminate in an import number in excess of 2.7 million tonnes during the 18/19 season.
European grain markets have tried to gravitate lower over the last week, but firmness in Chicago’s markets (usually in our afternoon period, when US traders take over the reins from the overnight session) has been a counterbalancing support.
Euronext wheat futures stand around €0.50/t (£0.44/t) above week-ago levels but some €6.50/t (£5.78/t) below values at the end of May. Crop production prospects across the EU and Black Sea region are not much changed from week-ago levels and, with time running out for any significant problem appearing ahead of harvest, production 'guesstimates' are mostly edging higher.
Between Russia and the EU, up to 20mt, additional wheat tonnage will soon arrive (over and above last year).
This is before cheap supplies of maize from S. America and Ukraine are anticipated to arrive into the EU later in the year. As such, competition for exports and domestic usage could be aggressive, keeping a lid on prices.
Egypt recently announced its first new crop wheat tender. Russia and Romania shared the 120,000t spoils, with prices reportedly below $198 (£156) FOB.
This is some $15-20/t (£11.80 - £15.77/t) cheaper than equivalent quality French supplies, suggesting French wheat prices may see more downside price action in the weeks and months ahead.
The recent lows set in the middle of May now seem distant as markets continue to rally strongly on weather problems that are mainly affecting US spring sowings.
The outlook for US wheat is little changed, but recent activity by funds covering large short positions in corn and soyabean has provided support.
Delays in corn plantings saw USDA earlier in the week trim its area forecast by 1.2m hectares and the overall corn yield by almost 35mt.
In addition, ongoing inclement weather in the US has increased concerns over potential quality issues in this year’s crop.
On their own, the global wheat numbers remain heavy. Current favourable weather conditions across the majority of the EU and Black Sea region support a perceived rebound in wheat production, although some dryness concerns persist.
This week the official Australian crop outlook was reduced, also due to dryness, and could be cut further if much-needed rains are not received in the coming weeks.
The updated US planting report due out at the end of the month may give more clarity on how much spring crop area has been lost.
Until then, we can expect reduced corn availability to continue to support wheat markets.
Weather is still very much in the spotlight, with wetter conditions in the US Midwest whilst dryness has intensified in key rapeseed/canola exporting countries.
As such, CBOT soyabean have now rallied nearly 3 per cent since Tuesday’s bearish WASDE report in which the USDA has left unchanged both its 2019 US soya planted area estimate at 84.6Mac (vs 89.2Mac last year) and its yield projection at 49.5bu/ac (vs 51.6bu/ac last year).
However, with just 60 per cent of the US soyabean crop planted as of June 9, looming final crop insurance planting dates across the Midwest and a wet weather forecast, the trade is dubious about the 2019 US outcome.
That said with record stocks, reduced Chinese soy demand and large South American crops, the long-term outlook remains bleak for oilseed prices.
For rapeseed, despite the significant production concerns in Europe, Canada and Australia due to insect damage, drought or a combination of the two, the USDA kept its 2019 world production forecast unchanged on last month at an optimistic 74.8mt ie +2.0mt year-on-year and down only 0.1mt from the 2017/18 record of 74.9mt.
However, the supply side of the equation for rapeseed is not getting any bigger and European prices will have to remain well above other origins to facilitate the expected 2019/20 increased import requirements.