The NI weekly market report

28 November 2022
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28 November 2022

Grains

Wheat – Global supply remains tight, and markets continue to react to news from Ukraine. Slower than expected Ukrainian exports could support markets, but recessionary concerns and questions over Chinese demand outweigh this in the short-term.

Maize – Tight global supply keeps prices elevated in the long and short-term, but recessionary concerns could limit any rises. South American plantings will be something to monitor over the next few weeks.

Barley – Barley markets continue to follow the wider grain complex, supported by tight global supply and demand.

Global markets – Global wheat futures felt pressure last week (Friday – Friday) due to the continuation of the Ukrainian grain export corridor, as well as COVID-19 lockdown protests in China raising concerns over demand.

However, continental grain markets felt some support on Friday after the EU cut its maize crop estimate again, as well as lower month-on-month exports out of Ukraine in November.

The continuation of the Black Sea export corridor has led to a bearish market sentiment over the last couple of weeks, though Ukraine’s Infrastructure Minister has now said that Russia is trying to limit ship inspections at ports.

It was reported yesterday that 77 ships were queuing to pass inspection in Turkey, and that the three Black Sea ports were currently only at 50% capacity. This morning, Ukraine revealed that it had exported almost 17.2Mt of grain so far this season, down 31.9% from the same point last year. In October, around 4.2Mt of grain left Ukrainian ports. It’s expected that this figure will not reach 3Mt for November, a key watch point for markets.

On the other hand, ongoing restrictions and testing requirements for coronavirus, as well as recessionary fears in China, are fuelling concerns over global demand for grains. China reported another record high number of cases this morning, after a weekend of protests across the country. Chinese demand will be something to monitor over the next few weeks and could cap any gains seen due to limited Ukrainian exports.

The European Commission on Friday further cut its 2022 maize crop estimate to 53.3Mt, down 1.6Mt from last month. As a result, the Commission raised its forecast of EU maize imports for the 2022/23 season to 23Mt, up 1Mt from the previous month’s estimate.

In Argentina, while weather conditions have improved slightly over the last few weeks, maize plantings are still running behind previous years. According to the Buenos Aires Grain Exchange, as at 24 November, maize plantings were 23.8% complete, compared to the five year average of 36.9% at this point in the year.

Around three quarters of Argentina’s maize will now be planted late. The planting of late maize will begin over the next two weeks and finish mid-January, though maize planted later typically yields 10-15% lower than early planted maize. The next seven days are forecast more favourable weather, and planting progression will be something to watch out for.

UK focus – UK feed wheat futures tracked global markets down last week. The May-23 contract fell 3.1% across the week (Friday-Friday). New crop futures were down 2.9% over the same period.

Domestic delivered prices followed the futures price movement down. Feed wheat into East Anglia for December delivery was quoted at £248.50/t on Thursday, down £10.50/t on the week. Bread wheat for December delivery into the North West was quoted at £320.00/t, down £9.00/t on the week.

With the UK now officially in a recession, the cost-of-living crisis continues to fuel concerns over domestic demand. AHDB’s strategic insight team found that consumers are looking to save money on their food, and therefore are choosing to trade down or buy fewer items.

Focusing on flour, home baking occasions are following a downwards trend and retail sales (in volume) are down at least 15% across all flour types. Find the full article here.

Last Tuesday, the first official 2022/23 UK supply and demand estimates for wheat, barley, oats and maize were published. As could be expected, larger wheat carry-in stocks, combined with a rise in production, outweighs an increase in usage, leading to a substantial exportable surplus for the season. In contrast, the barley balance is estimated to be the third tightest in 10 years. Find the full estimates here.

Oilseeds

Rapeseed – Rapeseed markets continue to be pressured in the short-term from crude oil markets. Longer-term, the outlook will follow the market sentiment of soyabeans which look to be well supplied.

Soyabeans – Short-term market focus is on Argentina’s soyabean plantings and Chinese demand which will be impacted from the zero COVID-19 policy. Longer term, currently the market is looking to be well supplied from South American crops going into 2023.

Global markets – Chicago soyabeans futures (May-23) marginally gained 0.7% across the week to close Friday at $532.64/t following strength in soya oil.

With the contracts closed on Thursday and trading part of Friday due to the Thanksgiving public holiday.

Despite strength in both soya and palm oil, nearby Brent Crude oil prices continue to be pressured with the contract down 4.6% across the week, closing Friday at $83.63/barrel, the lowest point since mid-January.

Chinese demand for soyabeans also remains a watchpoint with measures in place. The USDA reported weekly net U.S. soyabean exports (week ending Nov 17) at 690.1Kt for the 2022/23 marketing year, at the low end of analyst expectations of 500Kt – 1.7Mt (Refinitiv).

In other news, Argentina announced it would reintroduce its ‘soy dollar’ currency exchange rate for soyabean exports until the end of 2022. This aims to increase exports and bring in much needed dollars as farmers have been holding onto their crops as a hedge against local currency devaluing.

Rapeseed focus

Rapeseed prices continue to drop with the pressure on crude oil. Paris rapeseed futures (May-23) closed Friday at €592.25/t, down €17.75/t across the week. Delivered prices (Erith, Dec-22) followed futures down being quoted at £502.00/t, down £28.00/t across the week. Sterling strengthening (+1%) against the euro meant the pressure was greater on the domestic market. Trading closed Friday at £1 = €1.1621.

Price pressure on ICE canola futures continues as farmer selling increases in Canada after growers have held onto canola supplies; a recent futures selloff has triggered farmers to move stockpiles to market.

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