Farming News - Global concerns over final wheat production levels continue as USDA report looms over market
Global concerns over final wheat production levels continue as USDA report looms over market
Another move higher for prices this week as global concerns over final production levels continue.
The expected drop in US spring wheat crop ratings, coupled with harvest progress lagging behind last year’s, gave some support to the market.
Heavy fund buying in the maize market also provided spill-over support for wheat. USDA’s latest update is due later today, with traders expecting a rise in US maize and soybean yields and a drop in US spring wheat production.
European prices surged this week due to firmer global markets and a proposed reduction in Ukrainian exports.
The French agriculture ministry lowered its 2018 soft wheat estimate to 35.1mln t, down 1mln t, but still higher than other analysts.
A German co-operative group revised its country’s crop number higher, some 1mln t above last week’s German farmers’ estimate. Recent German purchases of Balkan feed wheat have risen to almost 1mln t, with the origin now calculating into France, which may ease supply concerns, especially with the recent rise in maize prices.
The Ukrainian government has proposed that milling wheat exports should not exceed 8mln t to maintain domestic supply – the country exported 10mln t last season. This was deemed supportive, given the overall global export milling situation.
UK prices followed other markets higher. Additional support came from sterling falling to below $1.29 for the first time in almost a year, triggered by continuing worries of a no-deal Brexit.
Harvest activity has increased in northern parts of the country. These additional supplies have eased delivery premiums.
Ongoing forecasts point to a decent quality crop, with yields remaining better than feared by some, although much regional variation is noted.
Markets continue to firm, but with prices now at multi-year highs and much of the bullish news already in the market-place, this leaves them vulnerable to bouts of profit-taking in the short-term.
The main interest in USDA’s report will be on how severely it cuts global wheat production. Against local estimates, a drop of 15-20mln t would be justified, along with its need to adjust the export matrix, shifting a chunk of demand away from the EU and Black Sea into the US export program.
Politics continue to provide much uncertainty, with the current US-China spat, and now the Saudi announcement decision not to purchase grains from Canada, all seen as supportive to long-term Chicago wheat prices.
In a year of declining availability, and with certain governments adopting strict trade policies, key importers may be forced to take whatever is offered.
Matif rapeseed prices remain supported by lack of ex-farm sales and the expectation of strong oil demand in Q4.
The market is still digesting the impact of the significantly smaller European crop, with the final production number now likely to fall below 19.5mln t.
Australia has seen little improvement and its crop figure could now be sub-3mln. There is also talk about downgrades to the Canadian crop, as hot, dry weather across the prairies affects potential.
However, the US soybean crop is in pretty good shape and the market is waiting to see what the USDA reports later today.
A significant upward revision in yield, to reflect the on-going improvements that have been reported in the weekly crop condition reports, could push prices back to the recent lows.
This fundamental threat to market prices could be reinforced by on-going political volatility and talk of a US interest hike in the near future.
In summary, the rapeseed market in isolation still looks supported, but it is part of a much bigger global oilseeds complex that is far from clear and remains tough to call.
India has announced it is awarding over 700,000t of contracts under its latest tender, for shipment until 17th September.
This week Egyptian origin urea has sold at $280/t FOB, up $3/t from previous sales. This remains $8-10/t below the highs seen a month ago.
However, UK prices have edged back to season highs, due to this week’s significant dip in the pound/dollar rate.
On a p/kg basis, urea remains an attractive buy against other sources of nitrogen. Growers have been covering requirements over the past week.
There has been little interest over the past week with harvest in full flow. CF has held terms, offering both a spot and December delivery option.
Imports, where available, now offer a discount to CF for growers that can take delivery August/September. This is likely to change as importers move onto higher replacement values for fresh vessels and feel the effects of the weaker pound.