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Weekly grain and oilseeds market view from Europe's weekly market view from Europe throws light on topics such as European Union versus Russian wheat exports… German wheat quality… UK crop yield debate…. biodiesel margins…


Key trends

Global rapeseed and canola supplies remain under threat. European markets and grain prices still crushed by Russian wheat exports.


Things to watch

Downward trends in Canadian wheat production causes supplies of higher quality milling wheat to fall.

The UK must make its decision on whether to be involved with grain exports.


Global grain

End of August sees contract lows across the board

Following a run of consecutive lower closes into the end of August, when both Chicago wheat and corn hit yearly contract lows, the markets have consolidated as signs of short covering emerged.

Fund managers have reverted back to a short position in most commodities as non-threatening US weather is deemed bearish to the markets.

Although the global outlook for coarse grains remains heavy, supplies of higher quality milling wheat continue to dwindle lower, with the recent downward revision in Canadian wheat production.

EU markets also hit contract lows in the last few days of August. They too have traded higher, although the spectre of increased Russian wheat exports continues to weigh on world and European prices.

The aggressive early pace of Black Sea exports is contrary to European exports, currently running more than 50% behind last season's pace, and with Russia holding a near-monopoly on Egyptian orders, European traders will need to find some extra demand in order to shift this season's higher production.

In summary, next week's US Department of Agriculture Wasde crop supply and demand report is unlikely to shift the bearish influence of record global wheat stocks, although the trade will be more concerned with what USDA reports in terms of US corn yield and production.

However, unless we see some major surprise in the USDA report, global grain stocks remain burdensome, and this provides resistance to any major price rallies.

David Woodland, Gleadell



European grain

Question mark remains over EU wheat quality

On paper, a late-April cold spell in France/Germany [accounting for more than 40% of the EU soft wheat production] coupled with a prolonged period of dryness in Spain/Italy and frustrating July/August rain across the northern part of Europe could have offered a friendly environment for prices.

Instead, December Matif milling wheat futures have been posting new contract lows for the last five weeks, with a surprisingly good EU wheat crop estimated between 148m-150m tonnes compared to around 144m tonnes last year and the 10-year average of 142.9m tonnes.

Europe - like any other major exporters - continues to be at the mercy of the mammoth Russian wheat crop now pegged at a record 85m+ tonnes by some private analysts.

However, a big question mark remains over the quality of the crop - except in France - after relentless summer rain in Germany/Poland, which is currently resulting in higher milling premiums on the domestic cash markets.

As a result, Germany has exported only 472,000 tonnes since the beginning of the marketing season on July 1, compared with 775,800 tonnes last year. The pace is 24% below the three-year average.

The recent rise in the "safe-haven" euro against the US dollar is also negative for exports as it makes the EU origin less competitive on the global market.

Benjamin Bodart, CRM Agricommodities


UK grain


Questions over a need for UK markets to export

UK markets continue to struggle with the end of harvest and global market uncertainty.

The global issues surrounding weather, logistics and politics will keep markets on their toes, but the issue for the UK is more about crop size.

The reports on yield are so variable that trying to calculate a crop number is proving very difficult. But this will be the key to any further price movements. Does the UK need to export grain or not?

Unofficial export numbers for July would imply there was a reasonable export through the ports, but most of the wheat moved was actually shipped to other UK destinations.

This UK-to-UK movement makes sense when you look back at domestic regional price variations.  However, there was also a reasonable tonnage of imports of maize and wheat from other EU and non-EU origins.

All these factors need to be monitored, as it will change the domestic dynamics as will the variability in quality we are seeing in some regions.

No two years are ever the same and market prices will always reflect the real pressure, or lack of it, in the domestic market.

But we cannot afford to allow too many imports only to have to drop prices dramatically to remove any surplus we may have, later in the year.

Cecilia Pryce, Openfield

Oilseeds market

Argentine biodiesel industry treads water

Soybean production in the US and South America this season are unlikely to reach last year's record levels, although it will greatly depend on the end of the growing season in the US where crops in the Midwest continue to suffer from dryness.

As a result, money managers have likely started to reduce their shorts this week, which translates by a four-session winning streak of more than 4.5% on Chicago.

Global soybean output will still be more than sufficient to satisfy a growing global demand in 2017-18, particularly if, as reported by a USDA attaché, Chinese soy imports will be less than initially thought due to high domestic stocks and ongoing negative crush margins.

Global tensions with North Korea as well as the hurricane damage from Harvey, followed by the risks posed by Irma and Jose are underpinning crude oils prices this week and adding to biodiesel production margins.

Despite domestic and European rapeseed output being better than expected this year except in Germany, global rapeseed/canola supplies remain under threat, particularly in Canada and also Australia where the ongoing threat of dry weather has now be escalated with untimely frost damage.

The EU this week is looking at whether it will lower taxes on the imports of Argentine biodiesel which is important for Argentine and EU biodiesel prices. Argentina has suffered a significant blow recently, with the preliminary decision of the US to raise import taxes for Argentine biodiesel.

Strength of the euro is limiting gains in Euronext rapeseed values for now, although a weaker sterling is helping to underpin domestic values in the UK as well as tight stocks from last season.

James Bolesworth, CRM Agricommodities

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