Wheat

While soybean and corn markets are caught up in trade war politics, the wheat market seems to have found some support.

Talk of further reductions in Australia’s drought stricken crops, and the possibility of early frost damage in Canada, has supported the Chicago market.

Funds are now reported to be square after liquidating their long position over recent weeks. Gradually the global export availability is tightening, and with the expectation of some sort of control being placed on Russian exports, we may have witnessed the low of the US market.

European prices in general have followed the US market. Egypt purchased a volume of wheat for November, with Russia again the major origin, and Saudi Arabia bought wheat thought be mainly sourced from long holders of German and Baltic wheat.

French wheat, thought to have been in line to grab a share of the Saudi tender, looks to have lost out on quality, leaving the French to take care of Algeria.

Although Russian prices have started to rise after several weeks of decline, they are still by far the cheapest origin, and continue to be aggressively offered.

UK prices have weakened over the week prior to yesterday’s bounce. Official data showed July wheat imports rising, while exports are limited to the occasional Irish vessel.

With this trend likely to continue through the early months of the season, end users seem very relaxed over extending coverage. The closure of the Hull ethanol plant and the likelihood of increased maize usage in feed diets means the current supply of wheat seems more than plentiful, adding to the negative sentiment overhanging the UK grain market.

David Sheppard Managing Director of Gleadell commented:

In summary, it looks in the short term that the US market may have bottomed, although a near record maize crop will keep rallies in check. Long-term, the likelihood of further global crop reductions and possible Black Sea government export intervention may support the US markets.

However, both the EU and UK market are trading a more domestic supply and demand balance sheet and may only be partially influenced by any rise in the US market. The market is still a complex picture and, when adding in weather, geopolitics and the uncertainty over Brexit, it remains a difficult one to call.

OSR market

Rapeseed prices have come under further pressure this week as the market struggles to find fresh demand.

Ongoing low water levels are affecting Continental barge freight, restricting demand and causing a spot logistical bottleneck with imported seed.

This slowdown in crush, and the ongoing switch from rapeseed to soybean crush by multi-seed plants, is also affecting demand and, whilst the biodiesel manufacturers will remain strong buyers of rapeseed oil into the winter, the market is not seeing this turn into fresh interest today.

In addition to declines in the Matif, the UK market has also been hit by a further rally in sterling. Higher-than-expected inflation data released this week, combined with improving Brexit mood music, has supported the pound, pushing it up nearly 1c against the euro, and taking circa £3/t from values.

Whilst the global balance sheet for rapeseed is tight and the situation in Australia continues to worsen, the market needs to find some demand. With a record US soy crop just around the corner, it may be difficult for prices to rally in the short term.