What to watch: A stop in production for the Ensus ethanol plant in Teeside in November is yet another negative story for UK domestic wheat demand.
The drought in Europe is still ongoing and dryer-than-usual weather has hampered winter crops.
US soybean exports are running 40 per cent behind last year.
And the world markets seem stuck in a spiral of uncertainty.
At the start of the week, lacklustre global markets and stronger sterling weighed on UK values.
This negative tone was given further impetus on Tuesday, with news breaking that the Ensus ethanol plant in Teeside would pause production at the end of November ‘due to the difficult market conditions’.
The closure is another negative story for UK domestic demand and wheat markets have reacted with a further dip in values.
Other UK feed consumers have good cover through to the new year, which makes any short term price rally look unlikely without a fresh story from overseas to shake things up again.
Milling markets are a similar story of supply outstripping demand at the moment. With the closure of Hovis Southampton affecting demand in the south, milling premiums have been under pressure, particularly in the pre-Christmas positions.
Better values are available after December and farmers have been taking advantage of this opportunity to lock into premiums in the New Year.
Zoe Andrew, Frontier
Although we have to remember that wheat is a weed and yields are made in May/ June across the Northern hemisphere, the start of the campaign for the 2019 harvest is far from ideal.
The drought in Europe and the Black Sea is ongoing and a widespread lack of moisture is evident across most of the continent.
As such, the European Commission has warned in its October Crop Monitoring report that ‘warmer and substantially dryer-than-usual weather conditions in large parts of Europe hampered the sowing and emergence of winter crops’.
However, there is still time for the crops to be drilled in Western Europe and some scattered showers are forecast in parts of southern Russia but France, the largest EU wheat producer, will remain dry for at least another week.
For now, the lack of EU wheat exports (-23 per cent year-on-year) due to the fierce competition from Russia continues to weigh on prices with a likely record Ukrainian corn crop of 31-32MMT adding pressure.
Matif wheat is down to a three-week low whilst maize dropped to its lowest in four months with the arrival of Black Sea corn on the Atlantic shore of France. The trade will now await the outcome of a meeting on Friday between the Russian government and traders before positioning themselves.
Benjamin Bodart, CRM AgriCommodities
The world markets seem stuck in the spiral of uncertainty. The published supply and demand numbers are still open to much debate, but more focus remains on trade uncertainties mixed with logistics and quality.
In a funny way it is no different to any other year but the constant reminders in the news around macros and politics is enough to keep the bravest of trader’s minds occupied.
Global commodity prices continue to show corn still well priced against other feed grains, but the world cannot live on corn alone and there is a fine balance before cheap imports could put pressure on domestic values, which in turn could result in needing to export or carry stock, later in the season.
On paper the worlds combined wheat and maize crop for 2018 stands currently at 1,799.23M/mt against October 2017’s number of 1,789.99M/mt but as much as these are similar numbers the trading environment seems miles apart.
The pace of the US corn harvest matched with winter plantings and weather will be the focus for the coming weeks – when and if winter really sets in and the southern hemisphere crops start getting combined in earnest, we may just see enough changes in global balance sheets to create the next commodity based price moves rather than a global external market sentiment move.
Cecilia Pryce, Openfield
The US bean market has re-adopted its bearish tone, due to a return to good harvest weather, negative outside market forces and reduced demand due to ongoing US-China trade friction.
US export shipments have only reached 10.6 per cent of the current USDA forecast, against a five-year average of 13.4 per cent, but more tellingly they are running 40 per cent behind last year. US board crush margins argue for continued strength in crush demand, helped by higher prices for Argentine meal shipments.
European rapeseed ended lower, although very much range bound, while Canadian canola fell to a five-week low, due to harvest picking up on improved weather and Agriculture and Agri-Food Canada’s ending stock forecast of 2.5mln t, double the September estimate and above last season’s 2.39mln t.
Asian markets remain mixed, with little change on beans, firmer meal prices, but sharply lower on veg oil prices, mainly influenced by recent declines in the oil and energy markets.
In summary, without a US-China trade deal, the US will continue to try and supply all non-Chinese demand, while Brazil and Argentina will price their beans close to the current 25 per cent import tariff.
The prospects of a pick-up in the US harvest, and talk of an early start to the Brazilian new crop export campaign could further compromise US bean prices, with some traders talking the potential for sub $8/bushel Chicago beans, 50c down on the current value.
David Woodland, Gleadell