Farming News - A look at the markets - European wheat prices have followed the US down
A look at the markets - European wheat prices have followed the US down
US markets have slipped further over the past week as fund managers continue to build on their existing short position.
Talk of record cold temperatures across parts of the US winter wheat area and data showing crop ratings declining from November in all states, except Kansas, has provided little support to a market driven lower by a continuously sluggish export programme.
Although wheat sales are slightly higher year on year, shipments remain 8% lower, with traders almost resigned to the likelihood of further increases in US closing wheat stocks.
European prices have followed the US down during the past week, with new crop values getting within €2/t of the yearly low set in March 2018.
Although Russian export prices have weakened, they are still higher than French, German and Baltic supplies, which should allow exports to further decline over the next few months.
Despite various rumours, the Russian agriculture ministry again denied that export quotas had been set on exporters for grain shipments, maintaining a 42mln t export outlook for the season.
UK old-crop values are virtually unchanged on the week, although new crop prices are down £2/t, pressured from a rise in sterling to a near two-year high.
Supporting that rise in the pound is the possibility of a delay in Brexit, although this depends on how voting goes on the Prime Minister’s Brexit deal, and a sequential agreement from the EU to extend the deadline.
In summary, US markets have reset contract lows and both the EU and the UK got close to taking out yearly lows, set last March.
With US, EU and Black Sea export projections all looking heavy, the concern now for the trade is how big is international demand, and how big is the export long, and when does the market liquidate facing the huge market inverses?
US/China talks will provide support, especially if wheat is included, but weather seems to have been placed on the back burner for now, despite much colder temperatures set for the US and Australia potentially facing its third consecutive drought season.
Chicago soybeans have come under pressure in the past week as spill-over selling from wheat and corn weighed on the market.
The ongoing failure of US grain exports to meet USDA’s forecast export pace, together with the uncertainty on the US/China trade deal, has seen markets continue to slide.
To add to this negative tone, weather conditions in Brazil have improved and the market continues to struggle to rally given the lack of supportive news.
In Europe, Matif rapeseed futures have stabilised, but cash prices remain under pressure. A shutdown in one of France’s major crushing plants and the lower-then-expected rapeseed crush, combined with the impending arrival of Australian imports, is increasing end-of-season carryout and weighing on the physical market.
Despite the relatively calm Matif, the UK has seen a sharp appreciation in the pound. The availability of well-priced French rapeseed in the UK has resulted in farm-gate prices falling £5-6/t on the week.
Commentary provided by Gleadell