USDA supply and demand report controls markets

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This week has seen the release of the September instalment of USDA’s global supply and demand estimates. All the numbers reported fell within the range of trade expectations. As far as wheat is concerned there was little to note, with the highlights being increases to both Russias production (+3m tonnes to 91m tonnes) and Ukraine’s output (+1m tonnes to 20.5m tonnes).

The global maize production is reported to be down by 7m tonnes, partially due to a reduction in yield (2.9 bushels/acre to 172.5bushels/acre) and area planted in the United States. However, this has been partially offset by some loss of demand.

The futures price for wheat has started to rise slightly again pushing through the top of the range (c. £275/t), having closed above £277/t for the last two consecutive sessions. This could open the door for a new range of £255 to £284, with ADM predicting a possible potential target of £295.

ADM has also reported that Despite the weakness we are currently seeing in sterling and the widening of the spread between ICE London and MATIF wheat futures, the UK remains uncompetitive on global export markets where European feed premiums have pushed lower, offsetting the move in futures. Whilst there is a steady flow of primarily frame-based exports occurring at the moment to the likes of Ireland and Spain, there is little fresh demand, leaving around 1m tonnes of the exportable surplus unaccounted for. This would leave an exceptionally large carry-out that is potentially unworkable and would certainly sit on domestic old crop pricing relative to the new crop.

In summary, ADM points out that it is an overall similar picture to last week with few shocks to the market. At the macro level, Black Sea geopolitics and Northern Hemisphere maize concerns continue to be the main factors. More locally, the UK remains a reliable £4-£5/t away from being export competitive, with ICE London futures needing to do the work relative to global markets to facilitate the shipping of what appears to be a sizeable exportable surplus.

Oilseed Rape

Chicago soyabean futures gained $9.64/t over last Friday’s session because of technical buying ahead of the USDA’s World Supply and Demand Estimates due on Monday 12 September.

The anticipated bumper crop in the US has caused farmers in Argentina to rush to sell stockpiled soyabeans before prices fall any lower. The favourable exchange rates in Argentina also meant that we saw 2.13m tonnes of soyabeans sold in the country in just two days, compared to 667Kt sold throughout the entire week before (Refinitiv).

The wider oilseed complex was guided down over the week by losses in palm oil markets. Malaysian palm oil futures (Nov-22) closed down 8.2% last week. Malaysian palm oil stocks as at the end of August, were at 2.09M tonnes, up 18.2% from the previous month, and at their highest since November 2019. Though as peak production season continues, low prices mean exports are expected to be stronger over the coming months.

AHDB reported that global rapeseed markets have been pressured by the losses in palm oil and soyabean prices, combined with concerns over slowing demand. Parts of the EU have also experienced some welcomed rain towards the end of last week, boosting the emergence of recently planted rapeseed and further pressuring prices.

The Australian government’s ABARES report released on Tuesday, also indicated that canola production in the country is forecast to reach the second highest level on record at 6.6m tonnes. This would be a 2% fall from the record reached last year.

Paris rapeseed futures (Nov-22) were down €15.00/t over the week, closing at €597.75/t. The Nov-23 contract closed at €608.75/t on Friday, down €14.25/t over the same period.

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