Feed Report- December
Read our latest commentary on the global cereals and oilseeds markets.
Reference date: 23 November – 11 December 2018
Wheat markets drifted sideways early in the month, with a limited amount of market-shifting news. Towards the end of the month, shifts in currency provided some support to markets. This was especially true for UK feed wheat futures (May-19), which were driven by Brexit negotiations. The latter will continue to be watched closely. US prices also rose overall during the latest period due in part to US and China trade talks at the G20 summit, and positive outlooks for US export potential. Elsewhere, the Argentinian wheat harvest is progressing slightly behind last year, according to the Buenos Aires Grain Exchange (BAGE). As at 6 December, only 36% of the crop was rated as good or in excellent condition, compared to 58% at this stage last year.
At a European level, EU-28 wheat exports continued to be forecast at 20.0Mt by the EU Commission last week (3-7 December) (21.3Mt in 2017/18), despite the organisation increasing its estimate for the 2018/19 crop. While output is still sharply below last year’s level, combined with a hike to the maize import forecast (up 2.2Mt from November), it does point to a slightly less tight European grain supply situation than previously forecast.
In the UK, wheat availability in 2018/19 is expected to remain historically tight, despite a drop in demand from the bioethanol sector. The first official estimates of UK supply and demand from AHDB peg the surplus available for free stock or exports at just 800Kt. Although 233Kt higher than in 2017/18, this is still well below the previous five-year average of 1.95Mt (read more here).
Looking ahead, early GB planting intentions for the 2019 harvest suggest a 4% year on year rise in the wheat area, the highest area for five years (AHDB Early Bird Survey). A combination of good autumn drilling conditions for many and higher pricing has encouraged more planting of winter crops, including winter barley and oats.
Oilseed markets saw mixed movement over the latest period. Chicago soyabean futures (May-19) rose by $12.12/t on the month (23 November – 11 December), bolstered by hopes of a resolution between the US and China following the Buenos Aires G20 summit.
Elsewhere, the anticipated size of the 2018/19 Brazilian soyabean crop has been raised by 1.1Mt to a record 121.4Mt, by consultancy firm AgRural. With a big crop forecast, development in weather conditions over the country will be watched closely.
Rapeseed markets were largely flat on the month. The Australian government has forecast canola (oilseed rape) production to fall by 39% year-on-year to 2.2Mt. On average over the past five seasons, Australia has accounted for around 17% of global oilseed rape exports. This may be reduced if this production estimate is realised.
On the continent, a further reduction to the projected EU rapeseed area for 2019 has been made by French consultancy firm Strategie Grains. The EU rapeseed area is now forecast down 12% from 2018, with challenging dry establishment conditions the leading factor. This follows significant rapeseed area falls of 24% and 18% anticipated in Europe’s two largest producers, France and Germany. Additionally, ongoing low water levels on the Rhine has limited demand for rapeseed oil on the continent. Difficulties in transporting raw rapeseed to biodiesel refineries and subsequent shipping of the finished product are causing significant problems for refineries based along the waterway. As a result, attractive biodiesel margins on the continent are unlikely to translate into support for rapeseed prices.
In the UK, the provisional results of AHDB's Early Bird Survey of UK cropping intentions for 2019 include a 3% reduction in the rapeseed area. Dry conditions in early autumn hindered crop establishment, with the difficulties compounded by cabbage stem flea beetle damage in some regions. This is highlighted in the first ADAS Crop Report of the 2018/19 season, released on 4 December.
Sterling weakened against both the euro and US dollar over the month, fuelled by ongoing Brexit uncertainty. The euro remained unchanged against the US dollar.
Hannah Clarke, Trainee Analyst
Hannah.Clarke@ahdb.org.uk, 0247 693 5745