WHEAT

Grain exchanges in the US and Europe have set fresh contract lows in the past week, except Chicago which got to within 10c/bushel of its previous low set back in May.

This is despite US, EU, and Ukrainian exports running ahead year on year, and Russia being close.

US prices are down about $5.50/t on the week after much larger deliveries were witnessed against the September position.

US corn prices have also hit fresh contract lows as exports continue to decline. This suggests further increases in stock levels, due to be reported on 30 September.

Harvest progress in Canada has been limited by rains. There are reports of quality losses in wheat and yields are said to be average to slightly below average in all parts of Manitoba.

A third straight year of drought in Australia, hit by below-average rains during the crucial growing season, means the country’s wheat output could shrivel by 10% from previous forecasts to below 19mln t.

Brazil is expected to introduce a tariff-free wheat import quota of 750,000t per year, starting in 2020. US wheat producers are seen as potential beneficiaries.

Russia’s agriculture ministry forecasts the 2019 grain harvest will total about 118mln t, including 75mln t of wheat.

EU prices are down €3/t on the week, despite Brussels reporting exports of EU soft wheat running 20% ahead year on year, at 3.63mln t.

London wheat futures are slightly firmer on the week, despite the pound gaining strength due to recent political developments.

The UK wheat harvest is nearing completion with crop estimates ranging between 15.8 and 16.2 mln t.

With the UK’s future becoming as clear as fog with the latest Brexit developments, market rallies appear to be potential selling opportunities, although a delayed Brexit would allow the UK to continue to trade on current UK/EU terms.

In summary, global seasonal lows are traditionally set around this time, and that appears to be the case again this season. However, with world production expected to rise by 35-40mln t, past experience may not provide a clear guide to what may happen this year.

OSR

US soybean crop ratings held steady at 55% good to excellent (55% last week, 66% last year for the same week). However, this is the lowest crop rating for this week since 2013.

Private forecasts of US soybean yields continue to come in below the current USDA estimate of 48.5 bushels/acre ahead of next week’s report.

Canada’s canola harvest is still two weeks away from being in full swing, with no weather problems to report.

Australian canola prices firmed up A$8-10 this week. Western Australia had 10-30mm of rain last week, which is holding the crop, but high temperatures and dry weather are forecast for the next seven days.

The increased share of GM varieties in the Australian crop is also causing concern over how much seed will be available to export to Europe.

EU rapeseed futures made new highs this week, up €5. Biodiesel margins remain very strong and the extremely tight supply and demand is still the main focus.

To put it into context, this year’s EU production (below 17mln t) plus Ukraine’s record output is still less than last year’s EU total, whilst rapeseed crushing is forecast to remain at similar levels.

In the UK, imports of Ukrainian seed will keep domestic crushers supplied for the next few months, filling any gaps in our own tight balance sheet.

Whilst EU prices continue to firm, stronger sterling has taken the edge off UK prices. This will continue to have a significant influence.

Source ADM