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Martin Doherty

Senior Analyst - Data & Analysis

AHDB Pork Market Intelligence

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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.

November 2018 Update

Reference date: 26 October - 20 November 2018

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Global grain markets tended to drift sideways this month, with most market activity leading to prices falling overall. Global wheat production figures were increased by several key organisations in their latest estimates released during the month. This was accompanied by a bumper spring wheat crop prediction for 2018/19 in the US and an increase in planted area for the following season (read more here). Despite this, the latest wheat stocks figure release from the Food and Agriculture Organisation of the United Nations (FAO) of 264.4Mt is 12.4Mt lower than 2017. This portrays a picture of global tightness, despite production estimates increasing. Contributing to the squeeze, the Australian government organisation ABARES expect that wheat production for 2018/19 will be 13% lower than their September estimate (read more here). With the stocks-to-disappearance ratio (a measure of stocks relative to consumption and exports) of the major wheat exporters already at its lowest since 2007/08, any further production drops could raise prices going forward.

Maize planting conditions in South America are currently favourable, with bumper harvests predicted for Brazil and Argentina for the upcoming season. However, with the current outlook for maize and wheat remaining tight amongst global exporters, this could support prices here in the UK, especially if any concerns grow surrounding the South American maize crop (read more here).

In the UK, wheat markets have been on a downward trajectory for most of the month. This has largely been driven by anticipated reductions in demand from the bioethanol sector and upward revisions to global wheat production. Wheat usage in GB animal feed production (including integrated poultry units) reached record levels for the month of September, while barley usage fell. Maize usage for September is 24% higher than last year, contributing to imports sitting significantly above the five-year average for the season so far (read more here).

Following a rise in the pound after the draft Brexit deal announcement last week (12-16 November), a succession of resignations in the Conservative government caused the pound to fall 1.5% from Friday 9 Nov to Friday 16 Nov, and pushed UK feed wheat (May-19) up £2.00/t across the week (Friday-Friday) (read more here).

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Global oilseeds markets saw mixed activity throughout the month, with various factors affecting prices. At the start of the month, expectations of a bumper US soyabean crop and record high ending stocks pressured US soyabean markets, along with continued trade tensions between the US and China. Hopes for a resolution in these disputes caused uplift to US prices the following week, with prices continuing to be stable over the following fortnight. The USDA revised down their world soyabean production estimate on the 8 November by 1.98Mt, driven by lower US production. However, world stocks are forecast to grow by just over 2Mt due to a cut in US export forecasts. In South America, planting of the Brazilian soyabean 2018/19 crop is progressing under favourable conditions, with production estimates remaining high. While a high South American harvest next season could weigh on global prices, any delays to planting could tighten stocks going forward.

At an EU level, consultancy firm Strategie Grains estimated the EU-28 rapeseed planted area for 2018/19 to be the lowest since 2008/09, with EU-28 production 10.7% below last year’s figure. This sentiment was continued as the month progressed, with downward revisions later made to the 2019 French rapeseed area by the French Federation of Oilseed Crop Producers (FOP) (Reuters). The currency volatility sparked by the draft withdrawal deal last week had a mixed effect on EU rapeseed. UK delivered rapeseed prices (Nov delivery) ultimately gained support from the weaker currency, while Paris rapeseed futures (May-19) fell in Euro terms.

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All exchange rates finished the period down on their starting positions. Sterling weakened against the Euro and the US dollar this month, with the Euro also weakening against the dollar. This comes as markets continue to ride on - and react to - the Brexit turbulence.

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Hannah Clarke, Trainee Analyst

Hannah.Clarke@ahdb.org.uk0247 693 5745