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19 / 07 / 2018

Grain Market Update

Grain

Irish merchants are actively canvassing for green grain supplies due limited availability of grain and a reduction in projected yields.

Prices for green barley at between 13% -16% moisture are being quoted at €190 per tonne (ex VAT).

Oats between 13% -16% moisture are being quoted at €180/t (ex VAT).

This mirrors the global picture where indications continue to point to a reduced global grain output in 2018.

World cereal production prospects trimmed and stocks heading sharply lower in 2018/19

Latest indications from the Food and Agriculture Organisation (FAO) continue to point to a reduced global cereal output in 2018. This will lead to negative prospects for the cereal supply outlook for the forthcoming 2018/19 marketing season.

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According to the International Grains Council latest grain market report, the total grains supply and demand outlook for 2018/19 has tightened. A 12m t cut for world grains production is due to adverse weather conditions in the EU and Russia and the EU, which has damaged prospects for barley, wheat and maize. Although global consumption is reduced, projected carryover stocks are down by 12m t m/m, with the year-on-year decline now seen at 54m, including a drop of 34m in the major exporters.

Total Grains Supply & Demand Summary – figures in millions of tonnes (m t)

 2015/20162016/20172017/20182018/2019Y/Y Change
Opening Stocks531561618598-3.1%
Production2,0152,1382,0902,077-0.6%
Total Supply2,5472,6982,7082,675-1.2%
Total Use1,9862,0802,1102,131+1.0%
Food675696704713+1.4%
Feed868915929932+0.4%
Industrial329344358369+3.1%
Closing Stocks561618598544-9.1%
Major exporters *150181173139-19.8%
Trade346353365369+1.1%

(*Argentina, Australia, Canada, EU, Kazakhstan, Russia, Ukraine, USA)

Total grains production in 2018/19 is expected to be a three-year low, as bigger outturns of maize and sorghum only partially compensate for poorer wheat and barley crops. Although total supply will be smaller, consumption is seen reaching a third successive record, with the largest gains for food and industrial uses.

(Source: International Grains Council, Grain Market Report GMR 489 2nd July 2018)


Grain Futures

World Markets Overview May – June 2018

A marginal decline in world total grains production is predicted in 2018/19 with supplies are down 1% due to tighter opening stocks.

Global total grains (wheat and coarse grains) production in 2017/18 was 2% short of the previous year’s record, but heavy stocks at the start of the season saw overall supply rise for the fifth year in succession. However, given sustained consumption growth set to be at a new high, the first world stocks contraction since 2012/13 is predicted. Trade (Jul/Jun) will be the highest ever, including record shipments of maize and barley.

Total grains production in 2018/19 is projected to be below the season before as a reduced wheat harvest is almost balanced by better out-turns of maize, barley and sorghum. But taking account of reduced opening stocks, total supply is set to decline to a three-year low.

The global carryover is therefore seen coming down for a second year, taking inventories to a four-season low.

(Source: International Grains Council, May 2018 Report & GMR 488 21st June 2018)


Wheat

EU prices have remained stable/supported on the week as the trade continues to focus on new crop prospects. Egypt issued another August tender that secured 120,000t of Russian wheat, but with almost 1mln t offered between Russia and Romania, it is likely these origins will still be there when Egypt comes seeking any top-ups.

Weather is still providing some issues, with dry conditions across much of Western Europe, while rains are seen in the Ukrainian and Russian spring crop areas, where the ministry expects Russia to harvest up to 100mln t of grain. That is lower than many analysts’ forecasts and is due to adverse weather and delayed sowings. However, the French crop is now being talked up to around 39mln t, and this will compensate lower production in Scandinavia, Denmark and some of the Balkan states.

(Source: Gleadell Market Report 28th June 2018: http://www.gleadell.co.uk/report/)

(Wheat Production Forecast, International Grains Council, May 2018 report)

(Source: DG AGRI)


Barley including malting barley

The French winter malting barley harvest is underway. First reports are of average yields and normal nitrogen. Screenings levels are reported to be higher than usual. The hot dry weather conditions are continuing through the EU, which is keeping malting barley prices high. Traders are getting concerned about the impact on yields and quality, but so far, the brewing industry has not reacted and are waiting for the spring harvest. The winter malting harvest should start in the UK next week, which will be extremely early.

(Source: Gleadell Market Report 28th June 2018: http://www.gleadell.co.uk/report/)


Rapeseed

The global oilseeds market continues to be dominated by the ongoing trade discussions between the US and China. The retaliatory imposition of tariffs on US soybeans imported in China has sent the CBOT soybean market into steep declines, as US traders try to work out how to price the 30mln t of Chinese demand that now attracts a 25% tariff.

Rapeseed harvest is underway in the Black Sea, with yields being described as average. First cuts on crops in eastern Poland are poor, and in France the crops harvested so far have been very variable.

In Ireland and the UK, the ongoing, hot, dry, weather is pushing crop maturity, and some growers have been desiccating crops this week. Harvest 2018 isn’t far away if it hasn’t already begun already.

(Source: Gleadell Market Report 28th June 2018: http://www.gleadell.co.uk/report/)

Winter Rapeseed Crop Stage

(Source: European Union Joint Research Centre, June 2018)


Soyabean

Despite record crops in Brazil and the USA, 2017/18 world soyabean output is forecast to fall by 4% y/y, to 336m t. This is almost entirely linked to a plunge in production in Argentina, but with falls, too, in India, Paraguay, Ukraine and Uruguay.

Most of the anticipated contraction stems from a heavy reduction in Argentina, outweighing stock building in the USA. Acreage gains are likely in 2018/19, especially in South America, as production recovers to a peak of 356m t, up by 6% y/y.

(Source: International Grains Council, Grain Market Report GMR 488 21st June 2018)

World Markets Overview

A mixed tone prevailed across world grain, oilseed and rice markets during the past month. While average maize and soyabean values weakened on a comfortable nearby supply outlook, wheat and barley prices moved higher on deepening worries about spells of dry, occasionally hot weather.
With crop forecasts being trimmed amid adverse weather, grains production in 2017/18 is expected to decline by 4% y/y.

Consumption is seen remaining high and stocks may contract for the first time in five years. Grains trade in 2017/18 is seen staying close to record levels, underpinned by strong shipments of wheat and maize.

Tied to a contraction in key exporters, global soyabean stocks are seen falling by 8% y/y in 2017/18. Trade is projected to rise to a new high of 148m t.

Rice trade is predicted to climb by 6% in 2017, remaining at a high level in the following year, on demand from buyers in Asia and Africa.

(Source: International Grains Council, Grain Market Report GMR 478 29th June 2017)

Grain Futures

World Production Figures


(Source: International Grains Council)

Wheat
EU feed wheat prices have dropped €3/t over the week, as a rise to a one-year high for the euro and favourable EU/Black Sea weather outweighs the strength in the US market.

Although the weather is currently favourable, the recent heatwave is seen to have caused some damage to the crop, with Strategie Grains lowering its projection for the French soft wheat crop to 1.6 million tonnes from their mid-June report.

UK new crop prices have fallen £2/t on the week, as the governor of the Bank of England triggered a rise in the value of sterling with a clear-cut suggestion that UK interest rates would need to rise. Old crop values seem to be easing as the potential of larger-than-expected old crop supplies, more optimism over new crop production, and waning consumer demand start to weigh on long-holders.

US spring wheat futures have soared to a three-year high as drought conditions in the northern plains increases the talk of greater crop abandonment and concerns over the availability worldwide of quality and high protein wheat supplies.  Although some signs of support are starting to drift into the Chicago market on spread trading, quality issues in winter wheats and current favourable weather forecasts for US corn and soy crops continue to limit the gains in Chicago.

Although short-term weather forecasts remain favourable, the long-term forecast (which is hard to trust) brings hotter, drier weather back into the US Midwest, which could stress crops during their key development stages.

(Source: DG AGRI)

Barley

In the UK, the first winter barley has been cut and the yields have been between 2.5 and 4t/acre. Spring crops in the UK are looking average to good and the UK may be on track for a big surplus.

The French winter crop is approximately 40% complete.  Overall yields and quality are average, however there are some areas achieving yields just below average with high nitrogen, which has made trade participants cautious.  The spring barley harvest in France should start in a couple of weeks and expectations are for an average harvest at best.

In the Southern Hemisphere, plantings are advancing and conditions remain favourable in North and South America, however, rainfall is needed in Australia.

Rapeseed

The rapeseed market has remained relatively stable this week with sterling/euro moves offsetting the volatility in the Matif rapeseed futures market.  Harvest in France has started with yields and quality being reported as slightly above average and the first vessels are loading in the French bay destined for the North European crushing mills.

(Source: Gleadell.co.uk)

(Source: European Commission – DG JRC)

(Source: European Commission – DG JRC)

 


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