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Weekly grain and oilseeds market view from Europe
Brazil’s wheat setbacks… to sap Argentine wheat export potential… Ukraine corn yield crop… EU corn price debate… Canadian canola output…
Brazil to help determine European wheat price level
In the global wheat market, analysts are looking more intently at South America. The Brazilian wheat crop is in trouble and imports from her southerly neighbour, Argentina, are expected to increase substantially as a result. In turn, a very cheap global supplier of wheat, in Argentina, could be removed from the global market, reducing the supply pressure across European markets and help to support prices. Meanwhile, in Russia, the dominant wheat exporter at present, prices stabilised last week, having rallied in the few weeks prior, due partly to sharply rising freight rates.
Logistical challenges here remain omnipresent, with the onset of winter looming. Will she be able to export 32m tonnes, as most analysts have pencilled in to their calculations? Or will exports be curtailed by harsh winter conditions? Any disruption here could give European exporters a greater chance of competing into north Africa - a price supportive element. After a slow start, the key US corn harvest is progressing well, at 38% completed. Rains delayed the start of harvesting but the next few weeks looks promisingly dry, which will allow speedy progress.
In Ukraine, which is a major supplier to the EU market, corn yields are almost 20% below last year’s level, amounting to a 3.5% production cut. Conversely, in France early yield reports appear very positive. With reduced Ukrainian supplies and waning harvest pressure in France, maize prices could find some support in the next few weeks.
Rupert Somerscales, ODA
EU maize spooked by fast harvest progress and rapid import pace
Euronext maize prices have snapped a three-week losing streak, but they remain fragile and at the mercy of the rapid EU maize harvest, with more than 60% of the French crop harvested.
Although, the official Mars bureau lowered tis estimate for EU maize yields from 6.99 tonnes per hectare to 6.91 tonnes per hectare, the soon-expiring November 2017 contract is set to post a fourth consecutive monthly loss with storage facilities reported to be full. According to the most recent trade data from the European Commission, EU maize imports are nearly 77% higher than a year ago at 4.3m tonnes or a hefty 1.9m tonnes increase. For EU wheat, the burdensome environment remains intact with fierce competition from Russia resulting in sluggish exports, record planted area of winter cereals in the Black Sea region and ample global stocks. As of last week, winter wheat plantings were more than 90% complete in Ukraine and virtually complete in Russia amid dry conditions. Medium-term, the usual weather stories will have to be closely monitored ahead of the winter, with wet conditions having already hindered plantings in northern Europe while the South remains too dry.
Benjamin Bodart, CRM Agri
Oilseeds markets edge higher
The surprise drop in the US soybean yield projection, plus concerns over dryness in Brazil, allowed markets to edge higher, triggering fund buying in the process. Although funds have almost doubled their long position as of October 19, an improvement in the Brazilian forecast bringing much needed rainfall has pulled soy markets off the recent highs. Strength had also surfaced from strong export demand, especially from China, where local crush margins remain favourable for bean imports, put at 93.5m tonnes for the season, 1m tonnes above the current US Department of Agriculture projection. Despite a weaker euro and Brussels citing crop EU planting issues, mainly in the north due to excess rains, MATIF rapeseed has only posted minimal gains, while talk of higher Canadian canola production has seen their market unchanged, but higher in the deferred positions.
Asian markets have been mixed, with beans and meal lower, but oil higher, following the recent surge in veg-oil prices. Malaysian palm oil is currently trading at a five-week high on strong demand. The market will now focus on the upcoming November USDA crop report, and the soybean yield. US farmers have been pushing on with harvest, reported this week at 70% complete, as the forecast looks to bring cooler weather into the mid-west. Reports that later planted beans are resulting in yields lower than expected may trim the crop further, and with the likelihood that higher Chinese imports could mean higher US exports, another tightening of the US 2017-18 balance sheet cannot be ruled out.
David Woodland, Gleadell