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Weekly grain and oilseeds market view from Europe, July 31

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Global wheat exports for July for the eight major exporters are near a decade-low. It is this lacklustre demand coupled with significant cuts in production for one or two of them that has seen markets move sideways.

 

The EU-28 wheat crop estimate has dropped below 130m tonnes, with analyst Stratégie Grains making 3m tonnes of cuts across France, Bulgaria and Romania.

 

In the UK, wheat yields have been very mixed so far. Initial results on winter barley show yields of below 5 tonnes per hectare on light land, but it is too early yet to have a national picture.

 

What to watch

Russia continues to throw out a mix of estimates, with the ministry still standing behind its 75m-tonne wheat figure.

 

 

UK grain

UK grain prices follow Europe lower

UK grain prices slipped back a touch on week-ago levels, matching declines on the Continent, where harvest pressure is exerting itself.

 

The pound was earlier a supportive element, having dipped against the euro, but Tuesday’s session saw sterling advance back below £0.91 per E1, pressing London futures over £1 lower on the day.

 

London’s November contract continues to trade either side of parity with the Paris Matif December lot, which may not be sufficient if UK wheat imports turn out to be on the larger end of current forecasts.

 

Time will tell. Historical trade/price spread data suggests the UK may need to trade £5 per tonne or more above Matif.

 

Looking ahead to the 2021-22 season, London’s November 2021 contract is trading fully £19 per tonne below May 2021, at £152 per tonne.

 

This puts UK prices at a £14 per tonne discount to Matif and implies an expected return to ‘normal’ levels of domestic wheat production and an exportable surplus for new crop.

 

In the field, yield continues to filter through with very mixed results so far. Winter barley yields have been reported below 5 tonnes per hectare on light land, but it is too early yet to have a national picture.

 

Rupert Somerscales, ODA

 

 

European grain

Swift French harvest keeps lid on prices

As harvest progresses across mainland Europe many questions remain regarding this season’s crop.

 

The swift pace of the French harvest (over 75% completed) had exerted some pressure on prices, although a general lack of ex-farm sales provided some support.

 

Yields have been disappointing, with a local analyst placing the crop at below 30m tonnes after adverse weather hit both area and yield.

 

In terms of quality, the crop is expected to meet the minimum standards of most of the country’s exports markets.

 

Lower French yields have, to some extent, been negated by better yields seen in Germany and Poland, although heavy rains during maturity and harvest have raised concerns over final quality in most of the Baltic and eastern EU states.

 

Russia continues to throw out a mix of estimates, with the ministry still standing behind its 75m-tonne wheat figure.

 

Consultant Ikar recently raised its estimate back to 78m tonnes. Reports of better yields in the more central and northern areas were cited for the increase.

 

The talk of better Russian crops and the recent demise of the US dollar have added to pressure on EU values, aided by declines in the Chicago market on favourable weather reports.

 

It would appear that EU crops are considerably lower year on year and the extent of that decline may yet be understated. Expect markets to remain driven by Black Sea prices for now.

 

David Woodland, ADM Agriculture

 

 

Oilseeds market

Oilseeds

In the US, soybeans are now in the blooming stage which is crucial for yield determination.

 

Current development of the soybean crop there is ahead of the long-term average. Following the recent good weather, conditions of US soybeans have increased slightly to 54% good and 15% excellent.

 

Strong new crop export sales to China have given markets some support.

 

In the UK, the rapeseed harvest is progressing well. However, yield reports are variable across the core varieties.

 

An increased area of rapeseed straw is to be baled this year due to the anticipated lower wheat straw availability.

 

With the weather set fair over this weekend and into next week, substantial harvest progress will be made with combines rolling in most areas of the country in rapeseed.

 

Overall yield performance is expected to be down with many growers now considering and weighing up rapeseed against some other alternative cropping options.

 

On the crude oil front, increased stock and Covid-19 fears have continued to weigh on the markets. While demand remains depressed and production curbs are being eased, crude oil markets are likely to remain under pressure for the foreseeable future.

 

Fred South, CRM Agri

Organic arable

Dairy sector turmoil fed through to grain market

The cereal market has been difficult in recent weeks as the impact of lockdown on the dairy sector has fed through to the arable feed grain market.

 

Dairy farmers have taken marginal cows out of the herd to reduce grazing and cut costs which has had an impact upon the demand for organic dairy feeds.

 

Feed companies have been slow moving contracts and we have not seen farmers buying an odd additional load prior to harvest as we might normally.

 

This has resulted in grain remaining on farm and there will be a carry over of grain, mostly barley this season.

 

The new crop market is slower to form than usual as feed buyers remain cautious and are confident in supply availability.

 

Despite the difficult winter and drought this spring most crop reports are reasonable and we are anticipating a reasonable harvest.

 

The reports from Europe and Black Sea suggest there will be good availability of grains this harvest and so the fundamentals of the market do not suggest values will improve.

 

The ongoing dairy challenges and uncertainty posed by the recession ahead is making forward business uncertain.

 

As with last season, the Baltic supply appears plentiful and will compete with Black Sea and early indications peg values for feed wheat at £230 per tonne ex farm and it will be currency rather than supply that will support values.

 

We will start the 2020 harvest season £30 per tonne below the 2019 harvest.

 

UK growers have been confident of markets given the low level of UK self-sufficiency but as seen with the malting barley market if demand falls it may mean making sales difficult if buyers have already bought volumes of imported grain.

 

Andrew Trump, Organic Arable

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