ODA Market Alert: A largely ‘friendly’ winter across B-Sea cast doubt on earlier crop downgrades.
Despite very dry early growing conditions and low recent temperatures (which is normal), crop conditions across the B-Sea region have improved of late. We were seeing 2021 Russian ๐ท๐บ wheat production at 76Mt (86Mt in 2020). However, even though widespread โice-crustโ risks prevail, current forecasts suggest an early start to spring in the week ahead, bringing warmer and crop-yield-friendly conditions into play. We will monitor conditions here closely, as the Black Sea ๐ท๐บ ๐บ๐ฆ region will still likely remain a key price benchmark for the 2021/22 season. At this stage, it would not surprise if Russia added 3-4Mt to earlier wheat output forecasts, should spring and summer conditions be amenable.
A very friendly winter across B-Sea cast doubt on earlier crop downgrades.
Despite very dry early growing conditions and low recent temperatures (which is normal), crop conditions across the B-Sea region have improved of late. We were seeing 2021 Russian ๐ท๐บ wheat production at 76Mt (86Mt in 2020). However, even though widespread โice-crustโ risks prevail, current forecasts suggest an early start to spring in the week ahead, bringing warmer and crop-yield-friendly conditions into play. We will monitor conditions here closely, as the Black Sea ๐ท๐บ ๐บ๐ฆ region will still likely remain a key price benchmark for the 2021/22 season. At this stage, it would not surprise if Russia added 3-4Mt to earlier wheat output forecasts, should spring and summer
Fresh outbreak of African Swine Fever in China ๐จ๐ณ threatens grain/oilseeds demand.
Latest intelligence suggests the fresh outburst of African Swine Fever (ASF) in China ๐จ๐ณ has dramatically escalated. Information from local producers (in industrial units) suggest around 6.2M head have been lost in the Jan-Feb period alone, with live hog output estimated to have fallen by 15-20%. This forces analysts to question Chinaโs demand for grains in the months ahead. Accurate information is scarce and uncorroborated. We will update clients in the days ahead, as substantiated details are made available to us and as we weigh-up the consequences to global cereal and protein (soybean) demand. The impact on world prices is not significant yet, with CBOT corn down 4% in the week. Domestic Chinese corn price remains highly elevated when compared to international prices.
Adverse Argentinian weather (again) in February.
Following good conditions in January, corn and soya areas have faced one of the driest Februaries in history. The 2nd corn and late soya crops are now entering their flowering stages and crops could well deteriorate rather than improve at a time when the world needs plentiful production more than ever to cope with the strong and ongoing Chinese ๐จ๐ณ demand.
Wet weather is slowing down soya harvest and corn drilling in Brazil
Ongoing rain keeps on affecting field operations in Brazil ๐ง๐ท. The soya crop is not under question, it should reach 134Mt as predicted. It will, however be harvested later and thus it is directly impacting the Safrinha (2nd corn crop) operations, which account for 60% of their national production. With only 40% of the corn in the ground vs 75% last year, a large portion of the crop will be planted out of the ideal window. Thus, it will be much more exposed to the traditional dry April and May weather. The 110Mt production forecast is clearly at risk and weather conditions will be monitored very closely by the market during the next 3 months!
ODA Market Alert: Global grain/oilseed markets consolidate as dollar strengthens, fundamentals ease and as traders crystallise profits.
Heading into the weekend, global ๐ markets are a sea of red. The main triggers for the sell-off are ideas that global demand for US ๐บ๐ธ supplies has softened, evidenced by weak US weekly export sales data and souring risk sentiment in financial markets. Soybean exports from Brazil ๐ง๐ท have now started to flow at pace (to China ๐จ๐ณ), as their harvest come on-stream, alleviating some market stresses witnessed recently. Additionally, a stronger US dollar is weighing on global agric prices. UK ๐ฌ๐ง wheat futures have not been immune, although our declines are less severe, due to tightening local considerations (Vivergo) and a weaker pound. Currently, we consider this price drop as short-term and does not change our overall supportive view for global ag markets ahead.
ODA Market Alert: Vivergo to re-open ethanol plant near Hull. UK ๐ฌ๐ง could become a net wheat importer again.
News from AB Sugar that they intend to re-open their vast ethanol plant in Humberside in early 2022 could have significant implications for the domestic wheat balance sheet. In previous years, the plant consumed 1Mt. It was thought the UK would be a marginal net exporter in 2021/22, but this news could switch the UK firmly back into being a net wheat importer, with potentially an extra 500Kt wheat demand. Much depends on the type of crop they will use and how much capacity they employ, but if it is domestic-sourced wheat, it becomes more likely we will need larger imports. In turn, UK wheat prices would again need to trade above Continental ๐ช๐บ prices. Currently, we are trading ยฃ5/t below (MATIF). LIFFE Nov21 up +ยฃ3 on the news!!
ODA Market News: Latest UK supply & demand update shows a marginally heavier wheat balance sheet.
In their second official estimates for the UK ๐ฌ๐ง 2020/21 balance sheets, officials see production number of 9.7Mt, from 10.1Mt in October. UK wheat usage in animal feed was cut by over 700Kt from November, to 5.9Mt, but this was compensated for by an increase barley usage, now put at 5.3Mt. Maize imports were raised to 2.9Mt (2.7Mt in Nov).
The numbers confirm that, due to huge price differences between crops that have developed this season, feed consumers have switched between various crops, looking to maximise their cost/benefits. This includes sourcing cheaper grain supplies from offshore. The updated numbers were largely expected by the market. We consider these figures are neutral for wheat and supportive for barley.