Feed Report- October
Read our commentary on the latest developments in the global cereal and oilseeds markets.
- Uncertainty over delays in Russian exports bolstered global wheat futures during the first half of the month, although this effect weakened as the month progressed. Increasing downward pressure from maize markets contributed to falling wheat prices, alongside lagging export sales of wheat from the EU and US.
- Total grain availability was revised up in the latest IGC estimates (27 September), driven by increased maize production in the US, EU and Ukraine. While US production was scaled back 1.3Mt towards the end of the month due to reduced yield expectations, maize stocks held by other major exporters (Argentina, Brazil and South Africa) were revised up. Increased global supply will add pressure to world grain markets, and will be watched closely.
- At an EU-28 level, soft wheat exports continued to fall over the last four weeks, following the strengthening euro against the US dollar. Exports for the week ending 14 October were the lowest so far this season, with just 100Kt of wheat shipped. The current close correlation of Paris and UK futures in both euro and sterling terms means that the future pace of EU exports is likely to affect the value of UK wheat (read more here).
- Domestically, production of all major cereals (wheat, barley and oats) fell in 2018-19, with wheat and barley production falling 5% and 8% respectively since last year. Additionally, oat production decreased by 2%, with oilseed rape production falling by 5% on last year. Consequentially, the UK wheat supply and demand balance is now forecasted to be 20% below last year, despite a slight decrease in domestic wheat consumption (read more here).
- AHDB usage data revealed that the amount of cereals used to produce GB animal feed in August 2018 increased to an all-time high for the month, reflecting the record amount of compound and integrated poultry unit (IPU) feed produced in August 2018. Ruminant demand for compound feed is also up 15% on the year, likely reflecting forage production issues this season (read more here).
- At the start of the month, European markets were supported by a combination of tightness of EU supply, strengthening of the US dollar against the euro and increased biodiesel demand. Estimates for the 2018-19 EU rapeseed production were both increased this month by the EU Commission and Strategie Grains, to 19.7Mt and 19.9Mt, respectively. However, European markets may continue to be supported due to prolonged dry weather causing concern over establishment and performance of next year’s crop (read more here).
- Across the pond, North American weather has also been a market supporter this month, with heavy rain delaying the Midwest US soyabean harvest and snow slowing the Canadian canola (rapeseed) harvest.
- US prices were depressed towards the end of the month due to an increase in forecasted global oilseed ending stocks (USDA), and sluggish US soyabean exports potentially contributing to higher global soyabean supplies.
- Moving forward, planting of next season’s soyabean crop is well underway in Brazil, with 16% more planted than average for this time of year. Brazil is a top global exporter of soyabeans, and the USDA forecasts the country will produce a record crop in 2018-19.
- On the domestic front, Defra have estimated UK rapeseed production in 2018 to be 5% below last year’s figure, at 2.05Mt. This comes despite an increase in the UK rapeseed planted area. Scottish rapeseed production in 2018 has been provisionally estimated at 125Kt (13% below last year) by the Scottish Government, affected by the difficult weather faced by growers this season.
The euro weakened against the US dollar during October, with the exchange rate at €1 = $1.1494 on 22 October. A weaker euro means that European exports are cheaper, and therefore more competitive, to the rest of the world. However, imports are more expensive.
The US dollar marginally strengthened against sterling during the month, with the exchange rate at £1=$1.3013 as of 22 October. As with the weaker Euro, UK exports are cheapened but import prices increase.
Hannah Clarke, Trainee Analyst
Hannah.Clarke@ahdb.org.uk, 0247 693 5745