Despite the US and Chinese governments’ ongoing discussions about resolving their trade dispute, the OSR market remains unimpressed, according to Gleadell.
The grain trader said that despite further announcements of fresh soya bean sales, the overwhelming issue is the lost business and, more fundamentally, China’s general slowdown in consumption.
“This is keeping US domestic soybean prices on the backfoot and CBOT futures are struggling to find any clear direction,” said Jonathan Lane, Gleadell’s trading director.
“The ongoing concerns about the slowdown in China are also affecting the Canadian canola market, with prices in Winnipeg falling during the week.
“China is a significant export outlet for Canada and, with StatsCan increasing forecast ending stocks to record levels, the market is struggling to come to terms with what is becoming a burdensome supply situation.
“European rapeseed futures have drifted lower on the week following a lacklustre trade, despite the weaker euro.
“With the February Matif contract now closed, and any futures-related technicalities out of the way, the market is now able to re-focus on the fundamentals.”
Lane added that the slowdown in the EU crush caused by low water levels in the Rhine during Q3 and 4 2018, together with the impending arrival of Australian seed, is likely to suppress any significant old crop rally even if farmers continue to remain sidelined from the market.
“The UK continues to be a follower and fluctuations in sterling remain the greatest influence on UK farm-gate prices in the short term,” he concluded.
Meanwhile, the US wheat market is up US$2/t on the week as it continues to tread water ahead of new USDA data this afternoon.
According to David Sheppard, Gleadell’s managing director, support is still seen emanating from the current US/China trade talks, and the assumption that China will purchases a quantity of US agricultural products, including wheat.
“However,” he added, “while US winter wheat plantings are expected to be declared at their lowest level in over 100 years, the likelihood of reduced 2019 production could be more than offset by a reduction in 2018 US exports, and higher ending stocks.”
European prices are down €2-3/t on the week, with Russian exports declining due to higher domestic prices, although at present the EU export programme is not reaping the benefits. Exports of soft wheat to non-EU destinations are still reported 26% down year-on-year, according to Gleadell.
“French farm office FranceAgriMer did forecast an increase in such exports by 150,000t to 8.85 Mt, but also lowered intra-EU exports by a similar quantity,” said Shepherd. “However, due to a reduction in domestic feeding, end-season stocks were raised from 2.8 Mt to 2.9 Mt.
“UK values are unchanged on the week, although sterling is weaker. While Brexit rumbles on, it was the release of the Basic Payment Scheme data by Defra that caught the eye.
“The data, which is subject to further investigation, showed a greater-than-normal divergence from the June survey estimate for the wheat area in England. If correct, that would dramatically tighten the dynamics of the UK’s supply and demand balance sheet,” concluded Shepherd.
The USDA will provide updated information of the wheat market later today, with US winter wheat sowings leading the interest, according to Gleadell.
However, the trade will also watch for adjustments to the US balance sheet, and whether USDA starts tinkering with the global export matrix, particularly for the EU and Russia, where current projection remains heavy. Otherwise, it remains all about US/China talks, Black Sea exports and Brexit, with BPS data throwing more uncertainty into the mix.