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Weekly grain and oilseeds market view from Europe

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The disparity between the UK wheat crop number from Defra, the UK farm ministry, and trade estimates has added to the uncertainty swirling around the grain market. Openfield’s Celia Pryce looks at the implications.

 

The French wheat harvest is completed, and now attentions are turning to Argentina, where cheap imports have been keeping prices down.

 

With a downgrade expected in Argentina’s production forecast, higher prices for France and the UK could be on the cards.

 

Key trends

 

UK rapeseed ex-farm prices have recovered about £15 a tonne over the last four to five weeks, while the European wheat market remained sluggish.

 

Russia’s harvest is expected to be extremely large, putting intense pressure on global markets as demand remains low.

 

May 2018 LIFFE wheat futures closed on Thursday, November 9 at £146.20 a tonne, a drop of £1.45 a tonne on the week.

 

European grain

 

European wheat market in stalemate - for now

 

It has been a relatively lacklustre week across Europe’s grain markets.

 

Aside from the habitual weekly trade information reported by the key players, there has been a dearth of fresh information for traders to get their teeth into.

 

Continental wheat prices have thus traded nominally within a E1-2 a tonne range all week, while in Russia we note a slight decline in milling wheat values at their main port (maintaining their competitiveness into the key Egyptian market).

 

Broadly speaking, Continental wheat prices remain firmly rooted at or around cost of production levels, unlike here in the UK.

 

French wheat exports into the North African market continue to be harried by cheap Argentinian imports, although this may subside in coming weeks as the Argentinians downgrade their production and export availability, which is likely to aid French wheat exports and support French and UK prices.

 

From the UK market perspective, last week’s ‘data dump’ by Defra (sector-by-sector grain usage data for September), shows that, for most of the UK’s balance sheet elements, domestic wheat demand is above last year - and last year saw a record level of wheat usage.

 

Rupert Somerscales, ODA

 

 

UK grain

 

Data remains a sticking point

 

The market continues to chew through usage data up to the end of September and try and work out what direction the market takes next.

 

The uncertainty over the UK crop number – Defra’s 15.16m tonnes or closer to the trades estimate of 14.6m tonnes - remains a sticking point.

 

If usage remains at current rates for ethanol and animal feed then on paper things are tight but that’s before imports of ‘alternatives’ are considered.

How much maize can the UK industries really consume if they wanted to?

 

With milk prices on the turn and an ever-increasing chicken population and a ‘hard, cold winter’ currently on the forecast it certainly looks like demand is unlikely to slow.

 

On the other side ethanol margins seem to be dropping while oil prices continue to rise and the EU is being told by many how much grain will need to be exported between now and the end of the crop year.

 

The market is certainly not an easy one to read and only goes to highlight the need for timely and accurate data which will become more important post-Brexit.

 

Making legislation based on indifferent data is no way forward and is likely to only add to volatility.

 

Celia Pryce, Openfield

 

 

Oilseeds market

 

Rapeseed rallies following veg oil prices higher

 

UK rapeseed ex-farm prices have recovered about £15 a tonne over the last four to five weeks due to a combination of higher vegetable oil values in Rotterdam and retention from farmers.

 

Globally, Europe will still need to import about 3m tonnes in 2017-18, with a large volume of Ukrainian seed having already arrived.

 

Therefore, in the months ahead, the European Union will be even more reliant on the Canadian origin as the Australian harvest will be slightly late with sharply lower yields expected from our local contacts.

 

The uncertainties surrounding the EU biofuel demand and the sterling mean farmers need to be cautious over price rises and take advantage of rallies as they appear.

 

Looking to set target prices early on is a good way of not missing opportunities, downside limits are also useful… if they are utilised.

 

James Bolesworth, CRM Group

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