Read our commentary on latest developments in the global cereals and oilseed markets.
Please note that from now on this commentary will only be updated monthly. To follow developments in cereals and oilseed markets in the meantime, please see the markets section of the website of AHDB Cereals & Oilseeds.
September 2018 Update
Reference date: 21st August – 21st September
- While the start of the month saw speculation over Russian export curbs supporting prices, this faded as the month drew on. Despite downward revisions to Australian wheat production mid-month, news of a record US maize yield forecast pushed prices lower. However, by the end of the month, concern over frost damage to Australian crops and the potential for lower Russian exports did lend some support to prices and stemmed the declines.
- At an EU-28 wide level, grain maize yields are now forecast to be down 5% year on year by the EU Commission due to further confirmation of the impact of dry weather this summer (read more here). This is 1% down from the August MARS report and could reduce feed grain supplies within the bloc.
- On the domestic front, news came from Vivergo at the beginning of September announcing the cessation of bioethanol production at the end of the month. Prices initially fell in response, although the true impact will be borne out in the course of time.
- GB compound animal feed production (including integrated poultry units) was 5% higher in July than year earlier levels, at 1.09Mt, according to the latest cereal usage data published this month by AHDB. Furthermore, this is the highest level for the month of July since records began in 1995/1996 (read more here).
- New analysis by AHDB suggests that a decline in bioethanol demand does not alone appear to drastically change the UK wheat supply & demand outlook for 2018/19, when looking at historical usage with wheat production and consumption scenarios. Meanwhile, the number of poultry chicks and poults placed in the UK continues to break records (read more here), which is supportive for grain demand from the sector.
- At the beginning of the month, much of the market was driven by currency fluctuations. Expectations for increased US soyabean production and stocks were offset by concerns over lower global rapeseed supplies.
- As the month progressed, forecast record US soyabean yields and the ongoing US-China trade dispute lead to falling prices, although higher than expected export data lent some support to Chicago soyabean futures (Nov-18) at the end of the period.
- Expectations for the 2018 US soyabean crop were raised by INT-FC Stone this month, from 124.5Mt to 130.1Mt. The risk management firm’s latest forecast is some 5.2Mt above the August forecast from the USDA and nearly 11Mt above 2017 levels. If confirmed, this would add to potential global soyabean supplies in 2018/19 and this weighed on US soyabean prices over the period.
- Trade tensions continued to escalate as the US imposed tariffs on a further $200 billion of Chinese goods. China responded by placing tariffs on an additional $60 billion worth of US goods. In addition, according to a report by the Wall Street Journal, China has cancelled trade talks with the US for the time being. As such, at least in the short-term, US soyabean prices will remain pressured by Chinese tariffs though the longer term impact of this remains to be seen.
- Canadian canola (rapeseed) production was pegged 10% lower than 2017 at 19.2Mt this month by Statistics Canada. This follows a hot, dry summer in the key growing provinces and is the first official estimate since harvest started. Last month, the International Grains Council (IGC) pegged the crop at 20.5Mt but still expected global rapeseed demand to exceed production in 2018/19. If confirmed, a smaller Canadian crop could further tighten global rapeseed supplies, which is likely to further reduce the influence of soyabean prices on rapeseed prices in future.
- EU-28 rapeseed production was reduced again by both the EU Commission and private analysts Strategie Grains due to the adverse weather in the growing season. The Commission cut its forecast by 0.5Mt compared to those made in late-July to 19.2Mt, now over 12% lower than 2017/18. Meanwhile, Strategie Grains cut its estimate of the 2018 crop from 20.0Mt to 19.6Mt. This further tightens EU supplies and is forecast to increase the EU’s oilseed import requirements in 2018/19.
- Year to date EU soyabean imports (1 July - 20 September) stand at 2.8Mt, an 11% increase from the same period last season (EU Commission). US exports to the EU have drastically increased reaching 52% of total EU imports, compared to 25% in the same period in 2017. This season has seen US soyabean exports become increasingly price competitive compared to other origins, as a shift in Chinese demand has pressured US prices while supporting prices from alternative suppliers in South America.
The euro strengthened slightly against the US dollar during September. On 24 September, the Euro was at €1=$1.1777. While a strengthening euro is not positive for European exports to the rest of the world (which usually trades in US dollars), it still remains well below levels recorded in the spring. A stronger euro against the dollar means, European products are less competitive in dollar priced markets and often pushes European prices lower in order to compete.
Meanwhile, the dollar has been strengthening against sterling during the month. A weaker pound means UK prices, in the context of global exports, will be price competitive, but means that imports of products (in US dollars), such as soyameal or fertiliser, are more expensive.
Vikki Campbell, Market Specialist Arable Manager
Vikki.Campbell@ahdb.org.uk, 024 7647 8741