Weekly grain and oilseeds market view from Europe


The second of our weekly market views from Europe relates how weather concerns are supporting markets across the globe as dryness hits US spring wheat crops.

A barley surplus is anticipated in the UK, despite expectations of low yields. The French wheat harvest gathers pace and harvests have started in the Black Sea.

World grain

Was the bearish July Wasde report misleading?

The major event of the week has undoubtedly been Wednesday July US Department of Agriculture Wasde report, with the trade expecting the US agency to cut both 2016-17 and 2017-18 global wheat ending stocks to 255.4m tonnes and 257.4m tonnes respectively.

Operators were clearly disappointed with the forecasts 1% [2.7m tonnes] and nearly 1.3% [3.2m tonnes] above analysts' estimates resulting in a correction lower in global wheat prices.

However, it is interesting to note that after an increase in the previous report, the 2017-18 global wheat production estimate is back down to the initial forecast of 737.83m tonnes released in May versus 739.53m tonnes last month, while the production across the top eight exporting countries could drop 40mt year-on-year.

With ongoing weather concerns in key producing/exporting regions - drought across the southern Canadian Prairies and the northern part of the US Plains which could lead to the lowest domestic spring wheat crop in 15 years, lower-than-anticipated EU/Ukrainian output and a bad start to the Aussie season - grain prices could well be supported medium term after the 'seasonal' but limited harvest pressure.

Surprisingly - or not - based on the deterioration in the US crop condition due to the recent dry and hot conditions in the Midwest, both the 2017-18 US corn/soybean yield forecasts were left unchanged while the stocks of US corn jumped nearly 5.5m tonnes on last month and those of soybeans were lowered by less than 1m tonnes.

Benjamin Bodart, CRM AgriCommodities

UK grain

Market gears up for harvest

The UK market is gearing itself for harvest to commence.

Traders and farmers alike will be keen to discover how the crop has fared, whether the heat adversely affected quality and whether recent rains hindered or improved yield potential.

The increase in wheat imports and the virtual shut-down of exports over the final quarter of the 2016-17 marketing year will ensure that carry-in stocks are larger than previously projected, providing some supply security over the early harvest period.

The UK market continues to be driven by firm global markets, all linked to production concerns in North America.

While these are supportive to the future markets, there is no correlation between US quality wheat and UK feed wheat, meaning growers should take advantage of the current market forces to at least some extent in their marketing strategy.

Assisting the rise in UK values has been a recent drop in sterling, triggered by less bullish talk from the Bank of England over interest rates, and a few choice words from Boris Johnson, UK foreign secretary, over the UK's divorce bill in relationship to Brexit.

In summary, growers have benefited from global events and a weaker currency.

Longer-term market prospects will depend on a sensible UK-EU trade deal and its impact upon the 2018-19 marketing year. However, crop 2018 prices certainly look attractive as a starting point.

David Woodland, Gleadell


After Australia, concerns are now emerging in North America

For much of this week, rapeseed prices have rallied in the wake of oils and the soy complex.

Given the falls in the ending stocks of US soybeans (old and new US campaigns), quarterly stocks which are lower than expected, and a smaller-than-expected acreage for the new campaign complex prices have been on an upward trend.

An insufficient rally on palm oil production in South East Asia has supported vegetable oil prices on the international markets.

With regard to rapeseed's fundamentals, the situation is still a cause for concern in Australia.

There has been some rainfall but not enough to ease the water deficit. No significant rainfall is expected in the production region over the next week, which is likely to continue having an impact on the country's canola yield potential.

Concerns are emerging in North America. After the irreversible damage registered in North Dakota in recent weeks, drought is now reaching Canada's canola-producing region.

Yield potential has not yet been affected, but the lack of rainfall over the next two weeks will do nothing to improve the situation.

StatsCan has published its estimates for Canada's acreage. For the first time, the record canola acreage of 9.24m hectares is higher than the wheat acreage, although production will struggle to surpass last year's levels given the current weather conditions.

In Europe, the harvests began before being stopped in their tracks by rain.

Additional reports are needed to give a more accurate idea of France's production level.


Readers choice: TOP-5 articles of the month by UkrAgroConsult