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Weekly grain and oilseeds market view from Europe, January 22

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London wheat futures peaked this week, setting a contract high which has not been seen since January 2013.

 

Global markets were looking for direction after the shocks in last week’s United States Department of Agriculture Wasde report.

 

And the oilseeds complex has traded sharply lower over the past week.

 

 

What to watch

Analysts and traders were waiting to see the impact of political interference in major exporting nations.

 

 

 

Global grain

Global markets search for direction

Last week’s US Department of Agriculture Wasde report caught many out with the drop in the US corn crop, but many are still concerned about the uncertainty that political interference can create.

 

Buyers with little forward cover are now looking at values that have increased, in some cases by around $40 per tonne from their last purchase levels.

 

Do these buyers have the cash to pay for such high-priced commodities or do they reduce their overall demand? Only time will tell.

 

Consumers globally will also be facing increased bills, especially in the livestock sector where soya values have risen so dramatically along with corn.

 

The reality is there is very little that is cheap and this is also true when it comes to feedstock for biofuels.

 

We have seen a drop off in demand for fuel globally, but can it have enough of an impact on biofuels and their feedstock requirements?

 

This will be the fourth year where global consumption of wheat, barley, maize and rice almost matches supply, leaving stocks flat lining or decreasing.

 

The uncertainty around China’s real demand and supply along with political interference in key exporting countries will upset many consumers and trade flows but ultimately the message is being fed to the farmer to produce or plant more.

 

The question is can we, at what real cost and who globally will have the first national food security concerns?

 

Cecilia Pryce, Openfield

 

 

European grain

European grain markets continue to be supported

Although the overall supply and demand implications for wheat have remained very little changed, politics continue to get in the way of rational supply and demand.

 

As Russia continues to plan on implementing an export tax, this is being absorbed partly by their domestic market, but also the free on board (FOB) export price.

 

Initially planned at E25 per tonne starting in mid-February, the Russian government is to now implement additional export taxes, bringing up the total tax to E50 per tonne from mid-March.

 

The planned additional tax has been causing further climbs in Black Sea export prices, which have been pushing up towards $300 per tonne.

 

Reflecting the climbing Russian prices, European prices have risen, allowing our domestic market to also push higher.

 

Further afield, corn markets have also gained support with the January USDA World Agricultural Supply and Demand Estimates (Wasde) pushing US and global corn markets higher due to reduced production estimates, while additional concern for South American production lingers.

 

However, while there is a lot of support which has pushed the market higher, the downside risks are mounting.

 

Export restrictions in Russia will be unwound at some point, either later in the season, or could cause grain to be held into next season, adding to supply later on.

 

Domestically, sterling is starting to show signs of a trend in strengthening value relative to the Euro, and on the whole, winter wheat for next season is looking reasonable.

 

While we might not have reached the top of the market, the slide back down is looking steeper.

 

Peter Collier, CRM AgriCommodities

 

 

Oilseeds market

Oilseeds complex trades sharply lower over past week

Chicago Board of Trade soybeans closed lower for the third session in a row on Wednesday, the first time this has happened since November, although they did finish well off the low of the day, ending at $13.70 per bushel.

 

There seemed to be more profit taking in Wednesday’s session with funds again reducing their long.

 

South American weather looks relatively unchanged from mid-week forecasts. Rain made its way across most of the growing areas but it is now starting to look dry again.

 

Argentina’s truck strikes continue, with some ports only receiving 10% of normal traffic.

 

IHS (previously Informa) raised its Brazilian soybean production estimates from 132.5m tonnes to match the USDA’s 133m tonnes. That was a surprise to some given the weather and reports of some crop damage.

 

Vegoil markets were again lower with Malaysian palm down again this week, a continuation of profit taking and concerns over demand.

 

Matif rapeseed has followed the wider market lower. On Wednesday, it quickly traded E9 per tonne down but thankfully things settled mid-morning and prices closed E4.50 per tonne down at E421 per tonne on the May contract.

 

David Woodland, ADM Agriculture

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