07 March 2018
Grain markets continued to rise last week (Fri-Thu), driven by declining winter wheat conditions in key US states and continued drought in Argentina.
Prices eased back on Friday, reportedly due to profit-taking by speculative traders in US futures markets and a slowdown in the amount of ‘bullish’ news emerging. Most grain futures, including UK feed wheat, still ended the week higher. Meanwhile oilseed markets were mixed last week. Chicago soyabeans futures (May-18) reached a contract high on Friday 2 March fuelled by dryness in Argentina. However, Paris rapeseed futures fell slightly (Fri-Fri) following their gains last week, with anecdotal reports of increased demand for soyabean over rapeseed.
The rating of US winter wheat crops in key growing states fell again in February due to the continued drought conditions. For example, in Kansas, the largest state in terms of area, just 12% of the crop is now rated as good or excellent, compared to 43% a year ago. With crops now breaking dormancy, yields in these states look set to be reduced unless rain comes soon.
Drought continues to cause concern for maize production in Argentina. Just 9% and 2% of early and late maize crops respectively were rated as good or excellent by Buenos Aires Grain Exchange (BAGE) as at 28 February. BAGE cautioned that unless rain is received in the coming days, yields are ‘likely to be reduced’, but held its production forecast at 37Mt for now (39Mt in 16/17). The situation in South America will remain a price driver over the coming weeks.
The balance between UK wheat availability and demand this season is forecast slightly (85Kt) higher than in December by AHDB, but remains the lowest since 2013/14. The latest forecasts include a temporary reduction in UK bioethanol capacity. Meanwhile, the balance for barley was reduced down 277Kt to 2.206Mt. This is in part due to animal feed demand, which remained strong in January.
The continued drought in Argentina has led to a further reduction in the projected soyabean harvest to 44Mt from 47Mt the previous week. This is the second consecutive weekly reduction of 3Mt of the Argentine soyabean harvest made by the Buenos Aires Grain Exchange (BAGE), highlighting the severity of the ongoing drought and its damaging effect on the crop. The percentage of the crop rated good/very good in the top three growing regions is on average 23 percentage points lower than the previous month (AgMinistry). If the BAGE forecasts are realised this would mean this year’s crop would be 13.5Mt lower than last year and 10Mt lower than the current USDA forecast.