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.
January 2018 update
Grain markets have been largely bearish over the course of the past month (28 December – 25 January). With little to sustain any market gains, UK feed wheat futures (May-18) fell by £2.85/t, from 28 December, to settle at £138.65/t on 25 January. This was the lowest contract price since 28 December 2016. Global grain markets have also been largely supressed over the past month. As at25 January, Chicago wheat futures (May-18) were down £5.18/t on the month, at £115.27/t. Meanwhile, Chicago maize (May-18) continued to move closer to the £100.00/t mark, falling by a further £5.04/t over the month to close at £100.46/t on 24 January. The pressure on US maize prices has been driven by the glut of global maize supplies, however, with the weakening dollar, it will be interesting to see if Chicago maize futures (May-18) fall below the £100.00/t level.
One of the main fundamental drivers of movements in grain markets over the past month was the release of the latest USDA World Agriculture Supply and Demand Estimates (WASDE). World wheat production in 2017/18 was forecast up for the sixth consecutive month, an increase of circa 20Mt since the July WASDE. The greater influence on world grain prices comes from changes to stocks figures. World wheat stocks in 2017/18 were forecast 400Kt lower compared with the previous estimates made in December. However, at a record 268Mt, they are forecast 6% up on last year’s level, keeping markets subdued.
In the January WASDE, global maize stocks were forecast a few million tonnes higher than in the December report, at 207Mt, which also pressured prices.
GB animal feed usage statistics, released on 12 January, highlighted record usage of both wheat and barley in compound and IPU feed production for the month of November. In November 2017, 298Kt of wheat was used in the production of animal feed, up 5% on the month (October 2017) and 7% higher year on year. Meanwhile, barley usage in November 2017 was up 20% on the year, at 99Kt. The spread between ex-farm (spot) feed wheat and feed barley between July and November 2017 averaged£18.78/t, compared with £17.59/t for the same period in 2016..
Oilseed prices have been mixed in January. Paris rapeseed (May-18) futures continue to decline, closing at £300.06/t on 25 January, down £12.63/t from 28 December. Meanwhile, over the same period, Chicago soyabean (May-18) futures declined by £5.76/t, closing at £258.71/t on 25 January. However, in dollar terms, Chicago soyabean (May-18) futures increased by $13.23/t since 28 December, to close at $368.78/t on 25 January. As mentioned above, the dollar has weakened against the euro and pound. .UK delivered rapeseed prices (Erith, spot) have fallen by £18.00/t from 5 January to £295.50/t on 26 January.
Spot UK soyameal prices (Brazilian, 48%, ex-store, Liverpool) were £312/t on 19 January, down £3/t from 15 December, but £8/t on the week. UK rapemeal prices (34%, ex-mill Erith) were £166/t on 12 January, up £1/t from 15 December.
In mid-January, soyabean prices came under pressure following the release of the USDA quarterly stocks report. US soyabean stocks were estimated at a record 85.9Mt as at 1 December 2017, up 9% on the year.
Towards the end of the month, Chicago soyabean futures received support from concerns over South American crops. Brazil’s 2017/18 soyabean harvest has had a slow start (AgRural) due to issues with soil humidity at planting and above average rains in January. In Argentina, 30% of the 1Mha regularly used for soyabean plantings was yet to be planted as at 18 January(Buenos Aires Grain Exchange) due to dry weather. While there are concerns over the Argentine soyabean crop, it is worth bearing in mind that global soyabean production in 2017/18 is forecast as the second highest on record and global stocks are also at record levels. So there is a cushion to mitigate any shortfall in Argentine soyabean production.
The average US soyabean protein content has declined by 1.2 percentage points from 35.3% in 2009 to 34.1% in 2017. The protein content of Brazilian soybeans is higher than US soyabeans, making the soyabeans of Brazilian origin more attractive. It is reported that higher yields for US soyabeans are squeezing protein content (Reuters). The falling trend in US soyabean protein levels could become a larger issue for US soyabean exports.
James Webster, Analyst
james.Webster@ahdb.org.uk, 024 7647 8844