Weather U-turn causes UK crop quality concerns.
US corn may have a problem, but the rest of the world does not.
And the situation on US soybean has been driving the oilseed markets.
What to watch
It could be an ‘interesting trading year’ for European markets where historical price relationships could be irrelevant.
December London wheat futures closed on Thursday at £151.85 a tonne, down 0.8% week on week.
Paris December wheat futures closed at E185.25 a tonne, rising 0.8% week on week.
Paris August rapeseed futures closed at E370.00 a tonne, up 0.7% week on week.
Rain makes grain until it doesn’t
After a prolonged period of dryness up until early spring which spooked operators who feared a repeat of 2018, Mother Nature changed its mind and things have made a staggering U-turn.
Heavy rains have been observed across most of the country last week resulting in localised flash floods, particularly in the northern counties where quality concerns are now on the rise due to lodged crops.
According to official data, the first half of June 2019 was one of the wettest in more than 30 years with more than 100 millimetres in Lincolnshire between June 1 and 15 compared to just 13 millimetres last year and about 30 millimetres on average.
However, the potential losses in the North could be more than offset by the above average yields expected further south and a 15m+ tonnes 2019 UK wheat crop would easily be achievable.
From now until harvest, crops only need more sunshine and warmth, precisely what the most recent European weather model has in store for the next 10 days.
On the physical market, an increased demand for feed wheat/barley is currently noticed due to ‘expensive’ maize prices whilst the harvest is just around the corner.
Benjamin Bodart, CRM AgriCommodities
Interesting trading year ahead
The European grain markets have again struggled to work out if they should try and compete with other origins or plough their own furrow.
US markets started the week firmer pulling the EU values with them but have since put in a downward price correction.
Prices of EU wheat were further questioned when Egypt bought a few cargoes of July 21-22 wheat around 210$ cost and freight. This was reported to be close to $15 cheaper than the cheapest French offer.
This could look like a shock headline, but the position is relatively early for France and with a relatively tight EU old crop carry out matched with now ‘expensive’ imported corn values, it wasn’t much of a surprise for many.
If imported corn values continue at current levels then EU old crop corn should look reasonably well priced and any consumers short of commodities will be looking close to home for supplies.
This home shopping could easily put demand back into wheat and barley which will successfully remove the EU’s need to compete heavily with Black Sea wheat short term.
The market should become even more interesting when the real story is known about planted corn acres in the US which is likely to result in an interesting trading year where historical price relationships could easily be irrelevant.
Cecilia Pryce, Openfield
Yes, US corn has a problem, but the rest of the world doesn’t
Now that the latest realistic date for US corn plantings has passed, the all-consuming ‘planted acreage’ debate of the last few weeks should fade.
Looking to new crop, on the supply side, the world’s growers will likely produce a record 2019 wheat crop, at well over 760m tonnes.
Europe looks to be on course for a decent grain crop, following last year’s disaster.
The Black Sea region will be producing another mammoth grain crop and will be aggressively competing for wheat sales into the Black Sea, Middle Eastern markets, the EU and Asia, likely front-loaded pre-Christmas.
South American corn and soybean crops are also substantial and will also be searching for export markets.
Some will head north into the US, but some will also try to gain access into Europe.
Down under, winter crops are finally planted and, even with adverse conditions of late, the US is still forecasted to have the largest exportable wheat surplus for the last three years.
On the demand front, question marks remain over Chinese soybean demand, as their ongoing African Swine Fever epidemic shows no signs of abating.
Indonesia, the world’s second largest wheat importer, is likely to need 11m tonnes supplies, slightly below the number one importer, Egypt, with a 12.3m tonnes requirement.
Philippines will be needing over 6m tonne imports.
Grains will begin harvesting in our part of the world in the next few weeks.
These markets will likely be amply supplied.
Meanwhile, our regional grain demand profile hasn’t altered significantly year on year. Heading into extra time, it’s supply 1: demand 0. Prices should act accordingly.
Rupert Somerscales, ODA