UK markets have followed the EU and US lower over the past week.
EU prices have started towards contract lows as harvest commences and exports remain sluggish.
And rapeseed prices have rallied to highs of this year.
What to watch
UK cereal crop conditions appear promising as barley and rapeseed harvests approach.
November London wheat futures closed on Thursday at £150.25, a fall of 1.3% week on week.
Paris September wheat futures closed at E183.75 a tonne, a rise of 2.4% week on week.
Paris August rapeseed futures closed at E364.75 a tonne, down 7.5% week on week.
UK markets follow EU/US drop
Old crop LIFFE wheat futures (Nov 19) trended lower over the last week, following in the footsteps of both European and US markets. UK futures have shed about £4 per tonneonne on week-ago levels and now stand at a sizeable discount to Euronext wheat futures of about £15 per tonne.
While the pound was a relatively supportive element for domestic prices, the more burdensome fundamental nature of our domestic and regional situation cannot be ignored, and without a supportive weather-related updraft in US futures, the lack of continental competitivity versus Black Sea wheat is taking its toll.
UK trade data posted on Wednesday showed an enormous amount of maize entering the UK in May, with Ukraine leading the pack. At 232,000 tonne, this is the second largest monthly maize total this season, behind January’s 309,000 tonne. Wheat imports also surprised, at 107,000t, compared to 69,000 tonne in April.
This, alongside weaker [than last year] data for wheat used by feed compounders for both April and May, goes a long way to explaining why the UK has ample supplies to meet end-user demand until harvest supplies are made available.
Cereal crop conditions nationwide appear promising at present, with only days before the barley and rapeseed harvest begins in earnest. As such, threats to yields are diminishing daily, but the overall quality of the crop is still to be determined.
Rupert Somerscales, ODA
EU wheat prices slip amid slow export prospects
After the recent weather scare, EU prices have started to retrace towards contract lows as harvests commence and exports remain sluggish.
Talk of better Russian wheat yields is adding to the negative sentiment, although better than anticipated quality is causing some logistical problems.
Russian exports are usually 11-11.5% protein specification, but with early results showing higher levels, exporters have to pay a premium to secure supplies, leaving them uncompetitive on export prices.
This week Egypt again purchased Romanian and Black Sea origin wheat rather than Russian.
More wheat is forecast to be cut not only in Russia, but the EU too, with few exports on the books. This is starting to cause unease among exporters.
France is expecting a 37m tonne crop, up 3mt on last year. However, exports to Egypt are currently way off the radar, the Baltic states are providing strong competition into Algeria and at current levels Black Sea wheat remains in demand in West Africa.
Russia’s crop estimate is declining into the 76-78m tonne range due to the hot dry June.
But it has only exported 170,000 tonne to Egypt in the July/August period, compared with 1.2-1.5m tonnes of shipments in the same months over the past two years, with only the late August position to fill.
The loss of these traditional export destinations during the key harvest period means they could be difficult to recapture later.
David Woodland, ADM Agriculture
Rapeseed rallies to highs of the year
Having been underpinned by the USDA acreage report which showed an increase in the US planted area to 80m acres, as opposed to market estimates of 84.4m acres, soybeans have continued to trade lower as global demand and stocks weighed on markets.
The report came as a surprise considering the expectation was for increased soybean plantings as a result of lower corn plantings. In fact the opposite was the outcome, although this story is likely far from over and July/August weather will be key.
Rapeseed values have rallied in recent days despite harvest pressure. Ukraine’s output and their foreseen exports remain a contributing factor as they produce and export a good crop. Harvest pressure could well be an issue for rapeseed prices although a weaker sterling is helping prop-up ex-farm prices.
Soybeans could add to the pressure in the short term as we see the market settle following the planting delays hype in the US, as well as without the usually strong demand from China.
Soybean values could easily embark on a correction towards $8.50 per tonne, without a further supportive catalyst and with the risk that the August survey for US planted area could show an increase in soybean area following the surprise in the last USDA plantings report.
James Bolesworth, CRM AgriCommodities