What to watch:Uncertainty over the quantity of EU shipments of wheat this year continue to be a hot topic, with the euro remaining firm and freight shipments expensive.
In the UK, exports for November fell to the lowest level since 2001/02.
Global sentiment remains underwhelmed following the latest USDA report.
And growing confidence in the South American soybean crop, alongside the slowing pace of US exports, have put the oilseed markets under pressure.
UK wheat imports outpace exports for a 12th consecutive month
Unsurprisingly, the UK remained a net importer of wheat for the last 12 months according to the most recent data released by HMRC.
A meagre 35,000t were exported in November, the lowest for the month since the 2001/02 campaign and taking the total so far this campaign to less than 230,000t or 75 per cent down from a year ago or 380,000t below the 5-yr average.
On the flip side, imports stand at their highest in 4 years at 738,000t in total of which nearly 40 per cent were from non-EU countries and they were once again above the season's average pace in November at 158,000t. Consequently, the cumulative trade deficit (exports less imports) is now at its lowest since at least 2000/01.
With a lack of farmers selling and despite a rather staggering performance of the Sterling against the US dollar, which improves our buying power, prices have remained resilient with May-18 LIFFE feed wheat trading within its £140-145/t for the last 2 months. Prices could come under pressure if maize imports continue at a such record pace with a total of 882,000t through to November.
For barley though, the domestic demand and the export programs have continued to be supportive for prices which are currently trading near campaign highs of £126-128 ex-farm for May-18 delivery. In November, nearly 114,000t of barley were exported ie 57 per cent more than in October.
Finally for OSR, domestic values have continued to erode amid a bleak veg oil environment and as such Del. Erith prices are at their lowest since the end of July 2016, below the psychological £300/t mark.
Winter crops have mostly benefited from clement conditions this winter and the 2018 harvest potential is above average according to CRM Agri clients feedback.
Matif wheat values continue fall
EU markets struggled to find upside on the back of a firm Euro/USD. The trade have watched Matif wheat values fall steadily now since July with the March contract now some €34 off their highs or 25US$. The drop still does not allow French wheat to compete to many Non EU destinations but certainly French wheat is valued to feed its near neighbours.
The amount of wheat that traders and analysts expect the EU to ship this year remains a hot topic – the USDA are still expecting a total wheat number of close to 27mt whereas a recent publication was closer to 21.5mt before durum exports. The difference will remain a debate for a while but with adequate supplies it really will come down to the EU consumer’s interpretation.
Do you wait and hope for downside on the off chance?
It is really a case of knowing your local markets very well. Last week saw the EU trade take the full allocation of Ukraine TRQ’s for wheat and corn and some barley along with the limited III country maize TRQ. The uncertainty is how long this really keeps the market satisfied and if prices with a tax still look well priced against domestic EU cargoes.
The freight market will also play its part as will weather – short seas freight has been very expensive recently with bad weather not helping and frustrating some trade.
Sentiment remains underwhelmed
European wheat prices posted yet another down week, as MATIF shed a further €5/t to set fresh contract lows. This puts French cash wheat prices around €10/t below cost of production. Markets on this side of the pond are still playing catch-up to last week’s steep falls on the other side of the pond, where CME wheat futures shed nearly 3 per cent on Friday alone, following a slew of bearish official data being released.
Of particular note, the USDA estimated winter wheat area at 32.6million acres, down 1 per cent on last year. While this is the second smallest area on record, traders had anticipated an even smaller area to be sown and the funds duly extended their already huge short positions.
The second key element keeping European wheat prices under pressure is the ongoing strength of the euro against the dollar. The single currency has risen by over 2 per cent on the week and over 5.5 per cent since November.
Despite the lower prices, in euro terms, European wheat is losing competitiveness against Argentinian wheat supplies into key North African markets.
Looking east, weather forecasts for the next fortnight point to a decent smattering of snow for some key Russian wheat production areas, which up to this point have been unseasonably lacking. The arrival of a protective snow blanket the young plants need to survive should ease concerns many have over widespread winterkill.
Latest USDA brings little change for oilseed markets
Oilseed markets have been under pressure this week as growing confidence in the South American soybean crop and the continued slowing pace of US soybean exports combine to create a bearish market sentiment.
South American weather has generally been good for crop development so far with the exception of certain areas of Argentina where rain is still required to ensure current production forecasts.
Rapeseed stocks in Europe and the UK remain substantial.
The market is seeing a push of Australian oilseed exports to Europe which, coupled with a strong euro versus the US dollar, is pressuring EU values.
Last Friday’s USDA report updated world supply and demand balance sheets but it did not bring any significant changes for the oilseed complex. Exports were trimmed but that was coupled with a slight reduction in US soybean production.
Brazilian soybean production was increased by two million tonnes to 110 million tonnes.
Meanwhile, Argentina’s soybean production was reduced by one million tonnes to 56 million tonnes. Overall, world soybean ending stocks remain more or less unchanged at 98.50million tonnes.