What to watch: Global markets were focusing on weather patterns.
French wheat has started to arrive on UK shores as the market reaches import parity.
The likelihood of increased stock, both within the EU and Black Sea region, could see exporters become aggressive sellers into the UK.
And Canadian and Chinese trade tensions continue to dominate oilseed markets.
Nov 19 LIFFE wheat futures closed on Thursday, March 27, at £148.25/tonne, a rise of £0.25/t on the week.
Domestic wheat values rebounded last week, with the LIFFE May19 contract currently trading at about £7/t from contract lows. Similar gains were posted across European markets.
News last week that French wheat has starting to arrive into the UK should not be all that surprising, since old crop UK futures have been trading at a premium to MATIF since late February.
On its own, this should cap any additional independent UK price gains, but the French market has also rebounded in the last fortnight and a rising tide should lift all vessels.
However, the pound is trading at its highest level for a fortnight and, if it continues to strengthen against the euro, this would dampen any additional spillover strength we may see from the French market.
Barley values continue to languish at a sizeable discount to wheat, despite reports that pig producers, in particular, have significantly increased its usage in their rations.
News that Saudi Arabia has returned to the market, purchasing 730,000t of barley will be a supportive element, even if the actual volume purchased was smaller than the market had been anticipating.
New crop grain prospects in the UK remain mostly favourable, with farmers nationwide reporting strong early spring growth, amid adequate soil moisture levels. Rapeseed is the exception, with significant widespread flea beetle infestations for many.
Wheat prices continue to consolidate from the near-contract lows witnessed earlier in the month.
Strong shipping line-ups, especially out of France, have helped underpin premiums. Exports from the EU are now reported at 14.4mt for the season to date.
Although that is 11.5% down on the year, at the start of January the shortfall was 25 per cent. Meanwhile French, German and Baltic supplies remain well-placed to obtain future business, as Russian exports slow and Ukrainian milling wheat shipments near the 8mt target.
Looking ahead to new crop, the prospect of a sharp rebound in wheat production remains, despite mounting concerns over dryness in parts of the EU.
Temperatures across Europe remain cool in the west, warmer in the east, with drier than normal conditions everywhere except Iberia and the southern part of Russia.
It is worth noting that in previous years when crop problems have arisen, they have mainly been due to inclement spring and summer conditions, rather than as a result of winter kill.
However, slow exports, waning domestic usage and the prospects of a rebound in production still portray a potentially negative outlook for the 2019/20 marketing season.
New crop EU wheat has already traded into the UK for the harvest period (late July) as the likelihood of increased stock, both within the EU and Black Sea region, could see exporters become aggressive sellers.
Global markets are increasingly focused on weather patterns and the size of the US fund short for fresh direction.
Widespread flooding and below average temperatures in the US plains and Midwest remains a flag for growing crops, while warmer forecasted weather could compound the problem, as snow-melt will add to ground moisture levels.
Conversely, soil moisture levels in the EU remain below normal everywhere except southern Russia, and now possibly Iberia where we see some short-term precipitation in the forecast.
US funds still hold a huge short position about 17 million tonnes, indicating they see the market trading lower despite the widely reported weather concerns. As a result, CBOT futures gained just 2 cents last week.
US soft red winter wheat traded into Egypt yesterday, but again, this was not enough to support futures markets. Matif traded firmer in anticipation that France would feature in this trade, but they were outpriced by the US, missed out on the business and futures closed €3 off the highs.
On Friday, the USDA will release wheat planting and stocks data which should give fresh direction. The average trade estimate of the planted area sits just below 67 million acres vs. 67.8m last year, but this slight reduction could be offset by a projected increase in March stocks from last year.
Rapeseed has now been brought to the centre of a diplomatic clash between China and Canada, with the Chinese now ceasing purchasing of canola altogether in a direct attack on Canadian industry following political disagreement, the Chinese still claim rejected cargoes were down to quality.
This is likely to cause a swelling in global rapeseed stocks this season, however EU stocks continue to remain relatively tight following last year’s drought. It remains the case that China still import around 5mt, mostly from Canada, and their imports have more than doubled over the past decade.
However, in the short-term, this has only added to the global oilseeds glut which has primarily resulted from political tension between China and their trading partners, coupled with good crops in key producing countries.
The EU rapeseed market is of course linked and continue to import more soyabeans and rapeseed than usual this season with both now in good supply for the remainder of this season.
Ultimately with harvest prices at about £300/t on new crop, it remains a market that will be dictated by crop conditions and trade negotiations between China and their trading counterparts.