Northern Ireland Weekly Market Report

30 March 2021

What do Rules of Origin mean for UK milling?

Prior to the UK’s exit of the EU, we looked at potential impacts on the UK milling and malting sectors. Now, with a trade deal in place with the EU, we have a clearer picture in place.

While the EU-UK Trade and Cooperation Agreement allows tariff free trade to continue, certain criteria such as Rules of Origin, now have to be met to access this preferential treatment.

Our strategic insight team have taken a look at the implications for the UK milling sector.

Grains

Wheat

Global wheat markets continued to fall last week as markets lack positivity in the lead up to the two USDA reports on Wednesday. Poll estimates point to the lowest US wheat stocks since 2015.

Maize

Sentiment in maize markets move from strength to strength ahead of the two USDA reports, with markets anticipating bullish reports for the commodity. However, US maize futures contracts eased off slightly from highs seen in early March.

Barley

Domestic barley markets tracked wheat declines. Despite this, UK feed inclusions remain strong, providing a baseline support for prices.

Global markets

Grain markets have been quiet on the week, with wheat seeing a degree of pressure, as we await two important reports from the USDA. The prospective plantings report and crop stocks report are due at 16:00 GMT on Wednesday.

In anticipation of a strong report, US fund positions in the net-long position for maize have moved to their highest point since February 2011, with over 20% of open interest being long.

If the report is more bearish than expected, we could see an increased sell-off risk as positions are exited. A downward pressure on maize markets and grain markets as a whole could be felt as an effect.

Average industry poll estimates point towards the smallest figures since 2015 for US maize and wheat stocks, as of March 1.

Last week, the EU Commission estimated 2021/22 wheat production at 127.7Mt for the EU-27. If realised, this is 9.7Mt higher than last season and 4% above the five-year average.

If the UK is to be a net-importer next season, import parity levels could be pressured by having the EU well supplied again.

UK focus

Last week, global wheat markets continued their drop off from the week previous. Domestic prices were unable to prevent drops reaching our markets, with the May-21 contract down £1.75/t to £195.75/t. The May-22 contract dropped £2.75/t to £168.45/t.

The USDA reports could provide a technical rebound as May-21 approaches the £190/t mark. However, they could also speed up the downward trend if increased wheat stocks appear in the report.

UK delivered cereal prices felt the wheat market pressure too. Feed wheat into East Anglia fell £4.00/t to £198.50/t for May delivery.

Harvest delivered prices fell £2.00/t to be at £160.00/t for East Anglia.

Oilseeds

Rapeseed

Support is likely to continue for rapeseed values on a global scale until new-crop comes online. On a continental level, supplies continue to look tight as we head into the 2021/22 marketing year.

Soyabeans

Markets remain supported at the moment. Brazil’s soyabean harvest is at 60.1% (19 March, Conab), behind last year’s figure of 70.8%. Wednesday’s prospective planting and stocks reports from the USDA will bring fresh news to the market.

Global markets

Chicago soyabean futures (May-21) were down $5.79/t Friday to Friday, closing at $514.60/t.

Initially the contract gained support as US President Biden’s renewable fuel targets increased demand for vegetable oil based biodiesels.

However, the contract subsequently ended down on the week. This was driven by pressures on Chicago soyoil (May-21), which ended down 2.58% across the week, and funds squaring positions ahead of the end of March USDA planting intentions and quarterly stocks data.

For soyabeans, analyst’s averages in a Reuters poll are estimating stocks at 1.543 billion bushels, 35% below the three-year average. 2021 soyabean plantings are estimated to be at 89.996 million acres.

On Thursday, the International Grains Council released their latest world forecasts. 2021/22 production of soyabeans is set to total 383Mt, up 22.5Mt from the forecasted 2020/21 production of 361Mt. Production rises in Brazil and the US are the main contributors to this increase, read more on the report in Friday’s Grain Market Daily.

Brent crude oil closed Friday at $64.57/barrel, gaining only $0.04/barrel across the week, after a week of swinging prices.

Rapeseed focus

Paris rapeseed futures (May-21) closed on Friday at €506.25/t, down €8.75/t across the week. Delivered rapeseed (May-21, into Erith) was quoted Friday at £450.00/t, with domestic trade reported thin across the week.

Sterling strengthened by 0.40% against the Euro, to close Friday at £1 = €1.169. The successful roll out of the vaccination programme in the UK continued to support sterling.