Frontier Agriculture
Member
World Markets
US wheat bounced from five-month lows yesterday, following the USDA report which was slightly supportive to wheat markets. World wheat production was dropped by 8.4 million tonnes from the June estimate to 736 million tonnes. This is down from last year’s record production of 757 million tonnes. Production drops were seen from three of the world’s major exporters: Australia, Europe and the Former Soviet Union (FSU), with the only increase coming from the US in light of a better spring crop. 2018/19 beginning stocks were increased and consumption was lowered but, despite this, the fall in production leaves projected ending stocks down at 260.8 million tonnes for the 18/19 season. This is over five million tonnes down from the June estimate and a 12.6 million tonne reduction on 2017/18.
Plantings in Argentina are 87% complete now and the USDA left their production unchanged at 19.5 million tonnes. Weather is now dry but with adequate soil moistures for planting to continue. Australia, on the other hand, remains too dry with soil moistures still in decline. Chances of an El Nino weather event there have increased to 65%, up from 50% a few weeks ago. The USDA dropped the Australian crop two million tonnes to 22 million tonnes but some local analysts have it closer to 20 million tonnes.
Matif wheat moved to a higher close yesterday after the USDA confirmed recent private estimates of lower production. They dropped the crop to 145 million tonnes which is down 4.4 million tonnes from the June USDA and 6.6 million tonnes lower than last year’s crop. This is not as low as Strategie Grains’ number of 33.2 million tonnes but it is below the French Agricultural Ministry at 36.1 million tonnes from earlier this week. As harvest progresses, yields will be under close scrutiny. The USDA also put production for the FSU nearly 21 million tonnes down from last season.
UK Markets
London wheat closed higher, with May 19 up £2.30 to £172.80/t. The trade was expecting a drop in production but the report came in lower than trade guesses and the lower EU crop put the limelight back on production issues there. London wheat has moved higher again this morning as a result, further helped by weaker sterling.
Yield information will be key as the market establishes how the EU crop is coming off and, as combines start to roll, how the UK crop is looking.
Oilseed rape
Oil World came out with a EU28 crop of 20.1 million tonnes, down 0.6 million tonnes from last month’s estimate and sharply below 2017’s 21.8 million tonnes production figure. The USDA report dropped the Canadian crop to 21.1 million tonnes – this is still well above last year’s 19.6 million tonnes and conditions look favourable.
Soybean markets look to be bearish. Last night’s USDA report had world production for 2018/19 up four million tonnes but world demand down three million tonnes – essentially dropping demand from China. World stocks were raised 11 million tonnes from last month – 2018/19 US ending stocks are forecast at record levels. European rapeseed prices remain the highest priced oilseed in the world.
Overall, the USDA report confirms that the world is not short of oilseeds, however, the tariff situation between the US and China will drastically change world trade flow in 2018/19. Given the price spreads between European oilseed rape and soybeans, we could see a lot more US soybeans in Europe.
US wheat bounced from five-month lows yesterday, following the USDA report which was slightly supportive to wheat markets. World wheat production was dropped by 8.4 million tonnes from the June estimate to 736 million tonnes. This is down from last year’s record production of 757 million tonnes. Production drops were seen from three of the world’s major exporters: Australia, Europe and the Former Soviet Union (FSU), with the only increase coming from the US in light of a better spring crop. 2018/19 beginning stocks were increased and consumption was lowered but, despite this, the fall in production leaves projected ending stocks down at 260.8 million tonnes for the 18/19 season. This is over five million tonnes down from the June estimate and a 12.6 million tonne reduction on 2017/18.
Plantings in Argentina are 87% complete now and the USDA left their production unchanged at 19.5 million tonnes. Weather is now dry but with adequate soil moistures for planting to continue. Australia, on the other hand, remains too dry with soil moistures still in decline. Chances of an El Nino weather event there have increased to 65%, up from 50% a few weeks ago. The USDA dropped the Australian crop two million tonnes to 22 million tonnes but some local analysts have it closer to 20 million tonnes.
Matif wheat moved to a higher close yesterday after the USDA confirmed recent private estimates of lower production. They dropped the crop to 145 million tonnes which is down 4.4 million tonnes from the June USDA and 6.6 million tonnes lower than last year’s crop. This is not as low as Strategie Grains’ number of 33.2 million tonnes but it is below the French Agricultural Ministry at 36.1 million tonnes from earlier this week. As harvest progresses, yields will be under close scrutiny. The USDA also put production for the FSU nearly 21 million tonnes down from last season.
UK Markets
London wheat closed higher, with May 19 up £2.30 to £172.80/t. The trade was expecting a drop in production but the report came in lower than trade guesses and the lower EU crop put the limelight back on production issues there. London wheat has moved higher again this morning as a result, further helped by weaker sterling.
Yield information will be key as the market establishes how the EU crop is coming off and, as combines start to roll, how the UK crop is looking.
Oilseed rape
Oil World came out with a EU28 crop of 20.1 million tonnes, down 0.6 million tonnes from last month’s estimate and sharply below 2017’s 21.8 million tonnes production figure. The USDA report dropped the Canadian crop to 21.1 million tonnes – this is still well above last year’s 19.6 million tonnes and conditions look favourable.
Soybean markets look to be bearish. Last night’s USDA report had world production for 2018/19 up four million tonnes but world demand down three million tonnes – essentially dropping demand from China. World stocks were raised 11 million tonnes from last month – 2018/19 US ending stocks are forecast at record levels. European rapeseed prices remain the highest priced oilseed in the world.
Overall, the USDA report confirms that the world is not short of oilseeds, however, the tariff situation between the US and China will drastically change world trade flow in 2018/19. Given the price spreads between European oilseed rape and soybeans, we could see a lot more US soybeans in Europe.