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July 23, 2018

UK wheat settles at its highest in more than 5 years

Cereals
  • New week and new highs for EU wheat futures with the European Commission lowering its 2018 yield forecast due to the prolonged period of dryness across Europe and the Black Sea.
  • The front month LIFFE feed wheat contract was up for a 3rd consecutive session and settled at its highest in more than 5 years after today’s 2% rally amid ongoing concerns re the size of the domestic harvest which is gathering momentum. So far, UK winter wheat yields have come off slightly better than expected with good quality being reported; milling premiums are in retreat.
  • The European Commission lowered its 2018 EU soft wheat yield forecast by 3.6% to 5.8T/ha vs its June estimate [full report here], spring barley -6.1% (ie 4.1T/ha), winter barley -3.4% (5.6T/ha) whilst rising its corn yield forecast by 3.9% (ie 7.6T/ha). The ‘total cereals’ yield would be more than 3% below the 5-year average at less than 5.4T/ha. The UK yield were revised as follows:
    • wheat: -1.7% from June to 8.02T/ha vs 8.16T/ha LY & 8.20T/ha on a 5-yr avg;
    • winter barley: -3.2% from June to 6.75T/ha vs 6.97T/ha LY & 6.98T/ha on a 5-yr avg;
    • spring barley: -2.4% from June to 5.64T/ha vs 5.60T/ha LY & 5.76T/ha on a 5-yr avg.
  • In Russia, both wheat and barley yields remain well behind last year’s levels at 3.8T/ha (-16.4% yoy) and 3.2T/ha (-19.9% yoy) respectively for this time of the harvest. Coupled with a pick up in global demand and quality concerns due to the arrival of rainfall in the coming days, Russian prices continue to edge higher.
  • US wheat was following EU & Black Sea prices higher despite a rally in the US Dollar.
  • Weekly EU trade update:
    • Wheat exports: 95.4KT | total: 499.7KT (-58% yoy);
    • Barley exports: 140.7KT | total: 233.4KT (-14% yoy);
    • Maize imports: 252.4KT | total: 846.3KT (-7% yoy).
  • Overview of last week’s CFTC report – Managed Money positioning [Futures + Options in K lots]:
    • CBOT wheat: net long 3.5K lots (+3.8);
    • CBOT corn: net short 129.3K lots (+24.9);
    • CBOT soybeans: net short 58.4K lots (+5.2).

Oilseeds

  • Despite a monthly 5.2% reduction in EU rapeseed yield forecast by the European Commission, matif closed lower for a 2nd consecutive session across the board in the wake of a weakening veg oil complex and crude oil snapping a 4-day winning streak.
  • Private US exporters reported the cancellations of optional origin sales totalling 165,000 metric tons of soybeans for delivery to China during the 2018/2019 marketing year.
  • Abiove raised once again its 2017/18 Brazilian soybean production estimate by 0.3MMT to 118.7MMT. Exports are seen at 73.5MMT vs 72.1MMT previously and crushing unchanged at 43.6MMT. According to a different source, the country’s planted area for the 2018/19 harvest is set to increase by 3-5% vs a 10-yr average expansion of 5.2%.
  •  Weekly EU oilseeds imports:
    • Soybeans: 186.3KT | total: 624.9KT (-26% yoy);
    • Rapeseed: 14.7KT | total: 49.3KT (-60.5% yoy);
    • Soybeans: 283.5KT | total: 1.0MMT (-19.1% yoy);
    • Rapemeal: 5KT | total: 11KT (+42% yoy);
    • Palm oil: 70.6KT | total: 277.4KT (-36.2% yoy).