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World wheat futures markets are drifting into the festive period, with little change in value but trading above the season's lows.
There has been no shortage of international trade, however, with Saudi Arabia buying 1.3 million tonnes and Egypt securing 480,000 tonnes in the week before Christmas. The problem for global exporters is Russia being the most competitive seller and taking all the business once again.
In the meantime, there's been little improvement in official data from Brussels tracking EU wheat exports. These remain 2.5 million tonnes behind last year, with 13.985 million tonnes shipped from a surplus in the range of 32-37 million tonnes.
The Southern Hemisphere's primary wheat exporter, Australia, is experiencing better than expected yields, with crop estimates moving up to 28 million tonnes, adding to the readily available world wheat supply. Although this estimate is still down on last year's record, pre-harvest analysts were estimating four million tonnes less.
Heavy rain and flooding have hampered winter wheat planting in France as well as the UK. The latest estimates from analysts see the French wheat area down 11% on the year - the smallest area since 2000. In contrast to the UK, this will not leave a deficit but will result in a smaller surplus with a high carry out from the 2023 season.However, the opposite is the case for Russia. Research firm SovEcon now puts its 2024 Russian wheat estimate at 91.3 million tonnes, up from 89.8 million tonnes previously and not too far from the 91.7 million tonnes of 2023. If this is true and Russia has 50 million tonnes to export, the world wheat trade is once again likely to be dominated and pressured by what continues to be the cheapest source.
Farmers were active in the market at the start of this week, having sold much more this year during the week before Christmas compared to the same period in 2022.
Supply has remained constant through the season and the market has begun to accept that tonnages continue to flow unhindered from Black Sea areas into Europe and beyond. This is due to novel supply routes being developed when others were more restricted - as a result we continue to see price pressure, particularly on barley given high stocks.
Barley is trading around £25/t under wheat, with the widest discounts seen in the north of the country. This has not helped the UK's export competitiveness, which currently sits around 40% behind last year.
A similar story is developing in new crop feed barley. New crop discounts to wheat are relatively wide for this time of year – roughly £21-23/t nationally. This is causing domestic demand to keep a bid under feed, prohibiting prices from falling to export parity for now.New crop malting barley is seeing some forward export demand for 2024 as offer prices are materially more competitive than that of Scandinavian origins. Domestic maltsters continue to seek cover into the new year - it will be interesting to see how much combined demand will come forward and how that compares to available UK supply.
After a flurry of farm selling and crusher buying in previous weeks, rapeseed is now truly in holiday mode. There has been a distinct lack of both farmer selling and crusher cover this week, as both parties look to have fulfilled trading requirements into the early new year period.
Rapeseed oil prices have also been subject to some pressure recently. Now priced well below €900/t, the EU is making efforts to block Chinese biodiesel imports from being 'dumped' in Europe. If successful, this would theoretically boost demand for some domestic veg-oils.There has been little support from other oilseeds this week. Soybean prices are subdued due to the improved weather conditions in Brazil and confidence that the soybean supply for next year will be comfortable. However, this story is not over yet as crops have a long way to progress until harvest.
The bean market continues to experience low levels of participation in the run up to Christmas.However, traded values have still managed to increase on the week due to the lack of liquidity and last-minute requirements coming from some consumers.
The outlook for next year remains the same - strong demand is expected to continue from domestic feed compounders, a lack of competitive protein crop alternatives in the market until the summer months and the conclusion of the human consumption trade for the UK.
Our market insights will resume in the new year from 5th January. In the meantime, we hope you have a great festive break and wish you all the best for a prosperous 2024.
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