Agribusiness News July 2024 – Cereals and Oilseeds

Easing markets undo Spring gains

Spring and Summer weather markets often bring additional volatility, and UK Nov ‘24 wheat futures values went up 15% through April and May, then back down again 12% through June. Most of the early price gain was initiated on the MATIF market, reacting to increasing European and eastern continental weather risks potentially creating a combined EU and Black Sea production downgrade of 15Mt. Significant if realised, it would represent more than half of the total EU export tonnage in 2023/24; this is why prices rose so strongly through April and May (Fig.1)

However, markets declined throughout June (Fig. 1) as the harvest began, bringing positive news regarding both yield and quality, which alleviated crop concerns. Initial results are indeed better than expected. In Russia, the core of the winter wheat region is harvesting at 6t/ha. Yields in Romania and Bulgaria are high, with quality rated as excellent. Consequently, traders are pricing in a better-than-anticipated harvest, leading to a logical decrease in prices. The first regions to harvest and export, located around the Black Sea, are currently pressuring global prices with aggressive offers in the initial Egyptian and Algerian tenders.

On the other side of the Atlantic, US winter wheat harvest has started too, with rapid progress (27% harvested vs 14% on a 5year average) and yields are on the upside (the highest since 2020). Spring wheat conditions are also excellent, above 70% graded as such. As a result, there will be more US wheat to export this season and with US export prices uncompetitive at the end of May, US wheat had to adjust very significantly in June (-18% in the last 2 weeks) to be competitive.

In the US, market pressures from the harvest typically diminish by the end of June. Meanwhile, in Europe and the Black Sea region, significant yield variations are expected across different areas. The most unexpected developments could occur in Western Europe, especially in France and Germany, where storms are affecting wheat potential again.

The wheat market story is therefore far from over. Real harvest results will be the trigger for price direction, first from Russia and then western Europe. Weather in July for US spring crops will also be highly important, especially for corn as South American production is certainly much lower than USDA estimates.

Wheat to import v Barley to export

New crop feed barley in the UK is significantly cheaper than feed wheat and is expected to stay that way. On one hand, the UK will need to import large quantities of wheat in 2024/25 to offset the anticipated lower production, necessitating high wheat prices to attract imports. On the other hand, with the largest ending stocks of feed barley in several years, the UK will continue to be a net exporter of feed barley. Therefore, UK barley prices must remain low enough to stay competitive in the export market, particularly to Spain and Portugal.

Oats conversely have a very tight balance sheet and fresh demand for July and August will put pressure on the arrival of new crop here in the UK. In Spain, oat harvest is well under way and an anticipated upward lift in production there will potentially limit import demand from the UK.

Paris rapeseed lost £20/t through June on the back of favourable soyabean growing conditions in the U.S and South America and although typically influenced by the sentiment in the soyabean market, the expected tighter global rapeseed availability out of the EU and Australia will partially offset the soyabean supply influence.

Mark Bowsher-Gibbs@sac.co.uk, mark.bowsher-gibbs@sac.co.uk 07385 399 513

Indicative grain prices week ending 28/06/2024 Source: SAC//United oilseeds/Farmers weekly/AHDB)