14 August 2018
European futures (Nov/Dec-18 contracts) gained slightly last week (Fri-Fri), as there was further confirmation of the impact of the drought across northern Europe.
However, US futures markets dropped markedly on Friday 10 July, in response to the latest USDA report on world supply and demand (WASDE), followed by a fall in European markets on Monday 13 August.
Reduced production estimates added confirmation to the impact of the drought in Europe last week.
Strategie Grains reduced its estimate of EU soft wheat (exc. durum) production by 4.7Mt, to 127.7Mt (141.8Mt in 2017). Meanwhile, it was reported that German grain production could hit a 24 year low, and French maize production was pegged 10% below 2017. This will tighten EU grain supplies and could limit exports from the bloc. Furthermore, France and Germany have been important origins for UK maize and wheat imports in recent seasons.
Conversely, the size of the 2018/19 US maize crop was hiked up by over 9Mt, as the USDA incorporated its first forecast of US maize yields, based on current crop conditions.
Previously the agency used a trend yield. At 11.2t/ha, the current forecast would exceed last year’s record of 11.1t/ha. This means the US maize crop is now pegged just 0.5Mt smaller than 2017/18.
Global oilseed markets also diverged last week. Chicago soyabean prices rose steadily during the week before plummeting Thursday-Friday (9 Aug - 10 Aug) on a bearish WASDE for soyabeans. Meanwhile, Paris rapeseed futures closed slightly up on the week, with crop concerns continuing to maintain prices.
US 2018/19 soyabean production was pegged at 124.8Mt in Friday’s WASDE, up 7.5Mt on the USDA’s July estimate. This hike in production was driven by estimates of US soyabean yields of 3.5t/ha, around 0.2t/ha above average trade expectations, in a pre-report Reuter’s poll.
US soyabean ending stocks in 2018/19 are also now forecast at a record 21.4Mt, 5.7Mt above the previous highest stocks in 2006/07.
The USDA’s latest release echoed forecast revisions in Europe with the EU rapeseed crop being cut by 1.0Mt to 19.2Mt. This is currently 468Kt below the EU commission’s production estimate which was last updated on 26 July.