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An eye on the grain market - March 7 update

What to watch: Oilseeds trade waits on USDA data.

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An eye on the grain market - March 7 update

While the UK market has not been immune to the volatility in global markets, the tight supply and demand situation has limited falls.

 

In the USA, widespread freezing conditions and snow continue to cause logistical issues for the transportation of grains which has increased nearby delivered prices.

 

Elsewhere, European prices have been pressured lower in the face of US weakness and a firmer euro.


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May 19 LIFFE wheat futures closed on Wednesday March 6 at £161.70/tonne, a fall of £2.55/t on the week.


UK - Ongoing volatility in global markets, but tight UK fundamentals supportive

UK - Ongoing volatility in global markets, but tight UK fundamentals supportive

UK wheat prices have not been immune to the downdraft in global prices. However, our tight domestic supply and demand situation has prevented our values from falling as much as those on the Continent.

 

The May 19 LIFFE / MATIF wheat price spread has narrowed from over -£8/t, to +£2 in the last few weeks. Exports will thus be unlikely whilst this spread exists, while imports will be encouraged.

 

In addition, milling wheat premiums have ballooned of late as merchants and consumers scramble for limited supplies as we approach the final marketing quarter.

 

Premiums of around £20/t have recently been quoted in the Midlands for decent quality supplies, compared to half that only a few weeks ago.

 

Imports can be brought in from the Continent at higher flat price levels than this and so, unless there is a rally in Continental milling prices, or farmers discover additional wheat in the back of their sheds and dump it on the market, a price ceiling could now be in place.

 

Meanwhile, Defra released their second UK Supply and Demand estimates last week.

 

Of the key changes they made since November’s estimates, production was reduced by 133,000t, to 13.95mt and wheat used in animal feed by 122,000t. Higher maize incorporation was notable and expected.


Rupert Somerscales, ODA


European - Lack of exports keeps European prices under pressure

European - Lack of exports keeps European prices under pressure

European prices have been pressured lower over the past weeks in the face of US weakness and a firmer euro.


New crop levels are hovering just above the yearly market low set back in March 2018.


Decent EU shipments, helped by further upward weekly revisions, and an improved French vessel line-up are trying to lend support. However, shipments to date are still reported being down 17 per cent at 12.6mln t, with the current season projection perceived as remaining very optimistic.


Russian prices, although easier over the last two weeks, still remain at a premium to German and Baltic supplies. However, the current old-crop/new crop inverse in the market could attract further long liquidation, as witnessed at the recent Egyptian tender.


The assumption is that EU stocks will increase further on lower wheat exports and domestic use, the latter due to higher maize imports and usage.

 

With no current perceived new-crop weather issues, exportable surpluses in the EU, Russia and the Ukraine are also building ahead of harvest, when early season demand is expected to shift back into the Black sea region.


With key importers’ harvests are only a few months away, that would suggest little scope for a huge rise in export demand for EU wheat, and wheat prices.


David Woodland, Gleadell


Global - Welcome rain in Europe while snow hampers US logistics

Global - Welcome rain in Europe while snow hampers US logistics

For the first time in a while, futures markets closed Tuesday slightly firmer in the UK, EU and USA despite nothing fundamentally bullish to fuel the support.

 

In the USA, widespread freezing conditions and snow continue to cause logistical issues for the transportation of grains which has increased nearby delivered prices.

 

However, crops underneath the snow are currently rated better than last year which bodes well for new crop.


In the EU, wetter weather should offer some relief to growing crops which have struggled through the last few months with limited soil moisture.

 

The European Commission forecast 2019/20 common wheat production in the EU at 140.8mt versus 128.7m last year in its first supply and demand outlook for next season. As a result, EU exports are predicted to rise to 25.5mt versus 18m this year.


Cameron Curry, Frontier


Oilseeds - Trade waits on new data

Oilseeds - Trade waits on new data

The start of the month sees the trade waiting for the next round of USDA data. Nobody seems convinced it will be of earth-shattering excitement but in a market where news remains very limited anything may just spark a move.

 

US – China trade deals involving soya still tries to hold the headlines, but the clock keeps ticking and with added confidence in South American crop numbers and price why would China buy US when there are cheaper options?

 

Rapeseed is more focused on local domestic markets. Industrial issues and shipping logistics seem ready to upset some EU markets which is not difficult to do with most countries having little surplus or deficit to move, but one extra imported cargo can easily impact ex farm values and as such all eyes are fixed on the ports. New crop prospects are also under scrutiny.

 

A few warm days and OSR plants that over wintered well are certainly looking much healthier but fields with issues in the Autumn may still be pulled up and replaced with a non-oilseed spring alternative.

 

With the EU OSR area already cut hard, due to planting issues, crop pricing will all come down to yield and it would take a brave person to say everything is looking great this early in the spring.

 

Cecilia Pryce, Openfield

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