The US was closed yesterday for their Labor Day holiday, but traded lower on the overnight session following news from Russia that counteracted last week's ideas of export restrictions. The Russian Ministry of Agriculture said yesterday that they do not consider it necessary to introduce export duties or restrictions but they are considering releasing 1.5 million tonnes of wheat from intervention stocks to help stabilise domestic prices. Over the last two weeks there have been three conflicting statements; the first stated that there would be no restrictions, followed by another stating there would be restrictions over 25 million tonnes and finally yesterday, there was a move back to no restrictions. It remains very unclear whether or not they will enforce anything this year, and if so when, but ultimately the price of bread in Russia and feed costs for their livestock sector will be the biggest drivers for the decision makers in the Ministry of Agriculture.
Argentina also made headlines yesterday with the introduction of export taxes on wheat. The tax is set at close to 10% but is worked out as four pesos to the US dollar. This means it fluctuates with currency which can be expected to remain volatile. Argentina's forecast remains dry, with rain needed now to stop wheat crops going backwards. Australian wheat made contract highs yesterday on the return of a dry forecast for most key arable areas.
Matif wheat traded higher yesterday before losing all the gains to close lower on the day after the news from Russia. EU exports showed that they are 49% behind last year's pace, with 2.2 million tonnes shipped so far versus 4.3 million tonnes this time last year.
London wheat started stronger yesterday on weaker sterling but reversed midday due to the turnaround on Russian export restrictions. This news dragged markets down to close £1.45/t lower on the day in both old and new crop positions. This morning the negative tone has continued, with wheat starting the day with losses of £2.70/t this morning.
With a dry forecast this week, most of the UK wheat harvest will be completed with just some finishing off left in Scotland. Yields have remained very mixed but some of the high production areas will help to balance out lower yields in the overall supply and demand. Feed supply will be tight this season with the livestock sector leading in terms of demand, but imported wheat has eased some of the tightness this side of Christmas.
With Brexit decisions seeming no clearer and the ongoing 'will they, won't they' with Russian export restrictions, currency and politics continue to make markets unpredictable and there is no sign of this settling down in the short term.
Last Friday, Statistics Canada dropped the canola crop to 19.1 million tonnes – this figure is one million tonnes below most trade guesses and two million tonnes below USDA statistics.
Strategie Grains and Oil World have put their European rapeseed production at 19.35 million tonnes. In Australia, there has been some rain along the East Coast but the main cropping area is still missing out on some much needed moisture.
Meanwhile, UK values are seeing support from a weaker sterling.
US soybeans are experiencing ideal weather conditions and given this, the USDA could well raise the soybean yield in next week's WASDE update. Following the Labor Day holiday yesterday, the latest crop ratings will be released tonight.
Chinese officials are talking about majorly increasing the domestic production of soybeans by 2020. Rapeseed oil is a big premium in comparison to sunflower oil, soy and palm oil and is not stimulating new demand.
The cropped area of oilseed rape in Ukraine has been increased, resulting in a record production of OSR. Reports are coming from Russia that the spring OSR crop has done well there. Spring OSR is grown in the east where conditions have been favourable – this will increase the export flow from the Black Sea to Northern Europe. Imports from Canada are still pricing into Europe.
As of today, Argentina is issuing export taxes on soybeans, meal and oil from today. This was widely expected and anticipated by the market. The weak peso has made export from Argentina very competitive in US dollar values. At the time of publishing, there has been no reaction from the market.
Overall, it seems that the bullish information around crop production in the EU, Australia and Canada is all fully priced into the market. Prices have increased on the back of lower production as expected but, at the same time, the price increases have put end products at large premiums over other competing oilseeds. As a result, new demand is lacklustre.
European crushers now have a large import program of Black Sea and Canadian origin rapeseed and are largely covered through to the end of 2018. 2019 brings a potentially large South American soybean harvest and possibly huge stocks of US soybeans without Chinese demand. In addition, the available exportable surplus of rapeseed from Australia will need to come to Europe in Jan-Jun 2019, as the market has covered itself in 2018 without Australian origin.If seasonal trends are to be followed, we expect soybean and canola prices to ease as harvest commences. The price outlook for UK farmers is good right now and given the above, at the moment it feels like prices are anchored and it could well be a good time to think about marketing some rapeseed.