EU wheat exports are flying, reaching the second largest level in the last 16 years, meanwhile planting issues continue due to persistent rain.
The weather situation across the globe is keeping markets on their toes, but issues remain specific to each region and country, with analysts watching very closely.
With the UK facing a substantial reduction in its wheat harvest, both old and new crop prices have rallied.
What to watch
Growers should watch the US weather regarding the last 15% of the US soybean crop which needs to be harvested, and European weather regarding the UK, and EU rapeseed crops, which at present continue to go backwards.
London May 2020 wheat futures closed on Thursday at £152.25 per tonne, a rise of 0.7% week on week.
Paris December 2019 wheat futures settled at E177.50 a tonne, down 0.4% week on week.
Paris February 2020 rapeseed futures closed at E389.25 a tonne, up 0.3% week on week
UK wheat market still in transition
Both old and new crop UK wheat prices have rallied hard against Continental markets in recent weeks.
Bearing in mind the planting problems much of the country has faced, this should not be too surprising.
In the post-harvest period, our nation was facing a substantial exportable surplus during the 2019-20 season. And domestic prices were very, very cheap, as a result.
Today, the environment is as far from being “comfortable” as one can get. Our markets, both old and new crop, are being driven by the outlook for a sizeable reduction in UK winter wheat plantings and output in 2020.
So much so, that the old-new crop spread (May 2020-November 2020) has risen from minus £8 per tonne, to plus £8 per tonne in a matter of weeks.
The London November 20-Paris Matif December 2020 futures contract spread, which provides an indication of UK wheat’s competitiveness with our Continental brethren, has risen from minus £18 per tonne, to plus £2 per tonne in a month or so.
The story is clear - we are facing a substantial reduction in the 2020 UK wheat harvest and the market is simultaneously trying to prevent exports from leaving our shores and encourage said old crop stocks to be held into new crop.
Furthermore, we will need to attract substantial imports in the new marketing year. This cannot be achieved with underpriced wheat prices.
However, the UK may be an island, but we cannot divorce ourselves completely from the world market.
Prices cannot and will not gravitate higher (relatively) forever.
Rupert Somerscales, ODA
EU grains drift lower in a lack of fresh news
Despite the ongoing winter grain planting issues across western Europe due to relentless rain and a weak euro, European futures prices have drifted lower this week.
December Paris wheat is off about £4.30 a tonne from October’s three-month high, in sterling terms, whilst March 2020 maize hovers over its contract low of £143 a tonne.
However, it is important to note that with French wheat plantings about 20% behind average at only 67% complete as of early November, farmers’ selling activity is very limited. As a result, FOB Rouen French wheat is standing at its seasonal high close to £154 a tonne.
Further support to the physical market comes from the rapid pace of EU wheat exports which total nearly 9.7m tonnes so far this season, ie the second largest level in at least 16 years.
As a result, the USDA increased its 2019-20 EU wheat export forecast by 1m tonnes to a five-year high of 29m tonnes in its most recent uneventful WASDE report released last Friday.
Before the arrival of winter, the trade will also keep a close eye on the Black Sea crop condition due to persistent dryness, although it is very early days and Russian farmers have drilled a record winter wheat planted area.
Benjamin Bodart, CRM AgriCommodities
Global markets reacting to weather
Global markets are once again focusing on weather.
Friday’s US Department of Agriculture Wasde supply and demand report did nothing to excite traders as many headed to Geneva for the annual Global Grain Conference.
The current weather situation globally is giving markets some underlying concerns but they tend to currently remain region/country specific rather than centre stage.
It is a long time until spring and what may be a very wet or dry field in mid-November still has the potential to pull through as an ideal seedbed in spring.
Certainly, with focus on global weather extremes it would be a brave consumer who did not keep an eye on key export issues, but we also know that substitution between commodities can happen quickly, if price allows.
With winter logistics hitting the northern hemisphere and harvest progressing in the southern hemisphere, everyone will be looking for price corrections which may need to be reflected to either generate or prevent shipments as deemed necessary, be it through supply or political moves.
Assume nothing and check everything!
Cecilia Pryce, Openfield
Weather and politics continue to set oilseeds market tone
The US-China trade debate continues and is driving the market. US exports continue to impress and this will be acknowledged by US Department of Agriculture in an upward movement of its forecast.
Until then, growers should watch the US weather regarding the last 15% of the US soybean crop that needs to be harvested, and European weather regarding the UK and European Union rapeseed crops, which at present continue to go backwards.
The recent rally in soyoil seems to have stalled, although delays are still seen with the US soybean harvest, put at 85% complete, as colder weather, including snow, is set to entrench the Midwest over the next week.
Concerns continue to mount over exactly what acreage will get harvested. As the planted area has increased year on year, the total number of bushels still in the field, in real terms, is considerably greater than at this time last year.
South American premiums have firmed again, on renewed interest from China, although market strength and currency weakness has not yet filtered through into increased farmer selling.
Paris Matif rapeseed retraced from the contract highs set earlier this week, whilst Canadian canola also fell on weaker soyoil prices and a firmer Canadian dollar.
Asian markets have been mixed, except for palm oil which remains close to the contract highs, as the Malaysian ringgit hit a two-week low.
David Woodland, ADM Agriculture