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Weekly grain and oilseeds market view from Europe, January 31

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- Russian wheat values dropped sharply (down $6 per tonne), while those in France were far more stable, aided by a weaker euro-dollar rate.

 

- Markets are likely to remain in limbo for a while longer as farmers hold off selling old crop until domestic buyers meet farmers’ current selling targets.

 

- After a steep 13% correction in a month due to the Chinese coronavirus outbreak and political tensions between Malaysia and India, palm oil has tried to rebound although unconvincingly.

 

 

What to watch

The old crop UK wheat price level destiny, for now, is largely wrapped up in the French-Russian export battle.

 

 

London May wheat futures closed on Thursday at £151.75 per tonne, a fall of 1.0% week on week.

 

Paris May wheat futures closed at E191.50 per tonne, a gain of 0.1% week on week.

 

Paris May rapeseed futures settled at E399.25 per tonne, up 1.3% week on week.

 

 

UK grain

Exports slow due to price stand-off

The UK markets continue to limp from day to day with little fresh news.

 

Where weather has allowed, farmers have managed to get on with some further drilling and even some spring field work, but tractor hours have largely been limited due to the storms which have battered all the country.

 

Farmers seem to be embracing the idea of “public money for public good” – without being paid any extra, by clearing fallen trees off roads and pumping water to help out local communities.

 

The markets are likely to remain in limbo for a while longer as farmers hold off selling old crop until domestic buyers meet farmers’ current selling targets, but with consumers always aware of import price parities the current game could end in tears for some.

 

The uncertainty around the 2019 crop size and what 2020 may bring just goes to show the need for good sound data and for those in positions of power to understand the market and the impact that “flaky” data can have.

 

Exports seem slow due to the current price stand-off, which ultimately leaves traders on their toes in anticipation that this market could be in for some good price moves as the months erode towards the summer.

 

Cecilia Pryce, Openfield

 

 

Global grain

Chinese demand remains key market factor

The US Department of Agriculture produced few surprises in Tuesday’s Wased report as the trade was already looking for a small drop in US wheat stocks, which was confirmed by the USDA raising exports by 25m bushels.

 

US corn inventories were reported unchanged month on month.

 

While the trade remains optimistic regarding exports to China, the coronavirus outbreak has raised some concerns over short and medium-term demand.

 

Officials have told the US they will meet their phase one purchase targets and WTO import quota.

 

China will remain the major factor in the market, with the trade waiting for any signs of increased buying activity of US agricultural products.

 

The longer the wait, the more nervous the US trade will become, especially if the virus outbreak continues to intensify.

 

Australia’s wheat harvest has been completed. It is expected to be one of the lowest in recent years following the severe drought, which has now been replaced by heavy rains and floods.

 

In Argentina, dry conditions have scaled back crop size to an estimated 19m tonnes, although reports that the crop may already be oversold may have consequences during the coming months.

 

Russian prices have started to ease as export competition eats into the country’s traditional destinations.

 

Recent Egyptian tenders have seen more aggressive offers, which have secured some business.

 

Both the Ukraine and Kazakhstan report exports running ahead year on year, which may result in a slower export pace over the final months of the marketing season.

 

David Woodland, ADM Agriculture

 

European grain

France and Russia vie for export market share

In the past week, Russian wheat values dropped sharply (falling $6 per tonne), while those in France were far more stable, aided by a weaker euro-dollar rate.

 

As a consequence, at this Tuesday’s Egyptian tender, Russia and Romania origins took the spoils, selling 180,000 tonnes each.

 

No French offers were made, since they were not deemed competitive enough.

 

In the previous Egyptian tender, French wheat was priced some $6 per tonne below Russian delivered prices and secured 180,000 tonnes in sales.

 

In this week’s Algerian tender, the bulk of the 660,000 tonnes of wheat purchased will likely be French origin, partly due to historical ties between the countries, partly due to a cheap finance deal from France and partly due to geographic proximity, which doesn’t disadvantage French origin.

 

With little expected competition forthcoming from Argentina, USA or Australia, French and Russian wheat origins are currently vying to carve up the North African and some Middle Eastern markets between themselves.

 

At present the French market is on the back foot, but with plunging dry bulk shipping rates and sustained weakness in the euro, French wheat may again become competitive into Egypt.

 

UK wheat export prices have been trading at a consistent discount (£5-10 per tonne) below French wheat for months.

 

Our old crop price level destiny, for now, is largely wrapped up in this French-Russian export battle.

 

Rupert Somerscales, ODA

 

Oilseeds market

Rapeseed at the mercy of palm oil (and China’s coronavirus)

After a steep 13% correction in a month due to the Chinese coronavirus outbreak and political tensions between Malaysia and India, palm oil has tried to rebound although unconvincingly.

 

Unfortunately, the COVID-19 [the new ‘name’ for the coronavirus] continues to spread rapidly, with more than 60,300 confirmed cases and a surge in the death toll with 1,369 dead, of which 1,310 in Mainland China, one day after a senior medical advisor in Beijing stated the outbreak would end by April.

 

The trade remains concerned about its potential impact on demand and it contradicts the optimism from the USDA, which in its February Wasde report raised its 2019-20 China soybean import forecast by 3m tonnes to 88m tonnes.

 

The US government keeps anticipating China will deliver on its promises to increase its US agricultural goods purchasing programme after the two largest economies in the world signed the phase one trade deal on January 15.

 

The 30-day implementation period from China will be over on Saturday and the market will be eager to see if Beijing jumps in this weekend to confirm large orders.

 

If not, prices could once again edge lower in the weeks ahead with a record 125m+ tonne Brazilian soybean crop and a brightening outlook in Argentina whilst their currencies are historically low against the US dollar, making them even more competitive on the export market.

 

Yet, the tight rapeseed-veg oil fundamentals have not changed overnight but it could take longer than previously expected for a sustainable rally in price.

 

Benjamin Bodart, CRM AgriCommodities

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