What to watch: The market has fully turned its attention towards delays with US spring crop plantings
No-one seemed to care about last week’s USDA report, with the markets focused on weather in the northern hemisphere
Brexit uncertainty continues in the UK markets, with reports of the Prime Minister setting an exit date driving sterling to a three-month low
And oilseed markets are shifting on the back of estimates, trade talks and currency.
Nov 19 LIFFE wheat futures closed on Wednesday, May 15, at £146.50/tonne, a rise of £3.75/t on the week
In the wake of an improving domestic outlook and depressed global markets, Nov 19 LIFFE feed wheat scored on Monday a fresh contract low of £139.50/tonne or about £10/t below last year’s level, while on the physical market prices continue to trade between £130-135/t for harvest movement.
After a prolonged period of dryness since mid-March, particularly in the eastern counties, rain has finally materialised and could well have saved the above-average wheat yield potential.
Some 30mm of rain has fallen in East Anglia and Lincolnshire in the first half of this month, which would be about 50 per cent and 75 per cent above normal, respectively.
Additionally, the UK was still a net importer of wheat for the 28th consecutive month in March 2019, with just 24,000t exported (i.e. the lowest for the month since at least the 1995/96 campaign) and 109,000t imported while at the same time, UK maize imports remain at a 20-year high, above 2.1mt.
The Brexit story is far from over, with PM Theresa May said to be urged to quit as soon as possible by the 1922 Committee, potentially before June 15.
As a result sterling is trading at a three-month low and extends its losses to a ninth straight day against the Euro.
Coupled with a strong rally in the US amid weather concerns triggering short covering, UK wheat is not giving up and it is now recovering to a one-week high.
EU markets continue to watch US crop conditions while trying to identify further price movements. The real impact of US/China trade issues will no doubt be felt in full sometime in the future, but currently emotion and uncertainty leave markets very nervous.
Spot domestic issues are creating localised domestic price squeezes around Europe, but the weather is still a concern and many are questioning crop potential, especially on the back of what is perceived to be a tight end of 2018/19 carry out. The import of corn still remains a focus, and price spreads between new crop wheat and old crop corn could create some opportunities for consumers to change commodity as they move into a more wheat-centric crop year.
The EU’s move to scrap the anti-dumping duties on US ethanol imports is also another uncertainty which could change the demand for feedstock into EU plants in the coming season, but others also question its real impact in the light of the EU’s biofuels quality criteria, which should limit US ethanols demand in the EU.
This is always a difficult time of the year with so many uncertainties to consider, especially when the trade has a fresh memory when it comes to the impact weather can have just before harvest.
Today, no-one seems to care about the USDA’s first world wheat balance sheet for 2019/20 published last Friday.
However which way you look at it, for wheat, it was a bearish report and bulls will struggle to interpret it any other way. World wheat production was put at a record 777mt and ending stocks at a record 293mt. Right now, no-one seems to care.
Other issues have arisen which makes the ‘out-of-date’ USDA analysis redundant. The market has moved on.
European and US grain and oilseeds markets posted another strong, positive trading session yesterday, as the market fully turned its attention towards delays with US spring crop plantings.
Chicago wheat added nearly 14c/bu, corn gained 15c/bu and beans rallied by 19c/bu, having traded over 30c/bu earlier in the session. As a consequence, in Europe, MATIF wheat closed up €1.75 and the nearby May 19 LIFFE wheat contract added £3/t.
Front and centre of the current market price volatility is the US corn crop and actually how significantly behind schedule it is compared to previous years (this also applies to US soybean plantings).
Since this is the world’s largest crop and speculators in Chicago corn futures hold a near record short position, any price-positive news was always going to prompt a sharp reaction across the globe. European markets have not been immune.
How much follow-through price support we witness in our markets in the coming days and weeks will depend largely on if US farmers in the Midwest can play catch-up in the weeks ahead.
As such, the only thing that really matters for the short-term are weather conditions in the US Midwest. Monday’s NASS (USDA) crop conditions and planting progress report will duly have considerable influence in the weeks ahead.
Additional price volatility should be expected.
OSR market values have been on the move this week due to a combination of 2019 soyabean crop expectations, political trade conflicts and currency fluctuations.
Friday’s USDA report gave us the first estimates for 2019 soyabean production. Prior to the report’s publication, soyabeans hit 10-year lows following the announcement of further tariffs on agricultural products between China and the US.
This seemingly reduced demand of US soyabeans and sent the market tumbling. The reality is that the South American soyabean harvest is progressing well and will likely supply Chinese demand, displacing the US.
Until Tuesday, the market had largely disregarded the global supply of soyabeans; US plantings are well behind the five-year average at this stage and the window for optimum yield is closing. This has caused a major uplift in values over the last two trading days.
In Europe, recent rain, warmth and sunshine have revitalised OSR crops. It remains to be seen what potential the crops have but they are in a better state than two weeks ago.
UK rapeseed has risen on the back of the soyabean uplift, as well as a weakening sterling. Growers remain nervous of selling at this stage of the season, but will be pleased to hear the market has lifted from recent lows.