GMO conference market outlook round-up: Grain market daily

• UK feed wheat futures (May-23) climbed £3.00/t over yesterday’s session, closing at £264.00/t. New crop futures (Nov-23) closed at £244.50/t, up £1.00/t from Monday’s close.
• Yesterday the European Commission announced that soft wheat exports from the EU in the 2022/23 season, as at 20 November, were up 4% on the year at 13.63Mt. Increased global demand for EU wheat added some support to continental markets, can we see this pace rise with increased Chinese purchasing?
• Whereas this news on increased EU supplies on the market pressured Chicago wheat futures yesterday.
• Paris rapeseed futures (May-23) closed at €605.50/t yesterday, up €1.75/t from Monday’s close. EU rapeseed imports in the 2022/23 season so far are said to have reached 2.85Mt, compared to 2Mt at the same point the year prior. Tight rapeseed supply in the EU keeps prices elevated.

Yesterday, our annual Grain Market Outlook (GMO) Conference took place in Grantham. We received some great feedback from those who attended on the day, with some productive and engaging discussions on markets, domestic demand as well as climate change and carbon markets.

This year has seen rising energy costs (with high fertiliser prices), combined with price volatility in global grain and oilseed markets creating a challenging environment. The AHDB market outlook section of yesterday’s event, aimed to prepare the UK grain and oilseed supply chain for another season of challenges, by providing insight into the direction of domestic grain and rapeseed prices.

So, what were the key takeaways from this session?

Global grain outlook

Megan, Senior Analyst, began the outlook by exploring whether strong global prices were going to continue supporting a well-supplied domestic market. With a key focus on wheat markets as a driver of the wider global grain markets.

Global grain supply remains tight, from large production swings in major global grain exporters over the past two years, due to drought and extreme weather, as well as the invasion of Ukraine. Despite the ongoing war in Ukraine, Russian and Ukrainian wheat remains competitive on the global market, and wheat exports are expected to remain strong providing the Black Sea grain corridor remains open. Megan assessed the forecasted total wheat exports, from major global wheat exporters, concluding AHDB expectations are for tighter supplies than forecasted by the USDA. These expectations are more in line with IGC forecasts, on lower forecasted exports from Argentina especially for 2022/23.

Maize was a key talking point too, as the floor to the wider grain market. The support in global maize prices from tight supply, could be pressured by a large Brazilian crop, combined with recessionary fears and poor US export sales. Something to watch going forward.

The global grains session concluded that the tight global supply, and a looming recession, will keep prices volatile. Prices look to remain supported by the continued tight global supply outlook. Though prices may not reach those highs seen early this year with current market conditions and recessionary concerns. Looking further ahead, some watchpoints highlighted were harvest 2023 planting (especially lower Ukrainian plantings), and weather conditions in the Southern Hemisphere.

Oilseed outlook

The session then turned to look at how the global soyabean market will likely drive domestic rapeseed prices longer term. Senior Analyst, Anthony, pointed out that soya oil has been sitting at the top of the vegetable oil complex since August, with other oils tracking this price.

It was said that Chinese demand will play a big part in setting the market sentiment moving forward, with soyabean crush margins starting to turn positive in China as of late. However, concerns remain for rising COVID-19 cases and ongoing restrictions. US demand for soya oil could also add some support to the market.

On the other hand, with an estimated record soyabean crop in South America, especially with Brazil seeing favourable conditions, combined with recessional fears and an active war in Ukraine, oilseed markets will remain volatile over the next few months, but could see some pressure on what is a well-supplied market. Though a key watch-point remains the Black Sea export corridor.

Domestic grain outlook

Millie took us through the UK focus section of the outlook. Yesterday, AHDB published the first official UK supply and demand estimates for wheat, barley, oats and maize for the 2022/23 season.

It’s estimated that the 2022/23 season will see a larger wheat balance, but that the barley outlook remains tight.

Total availability of wheat this season is forecast to rise by 8% on the year, driven by a rise in production and carry-in stocks. A rise in production has led to a 1% increase in forecasted available barley supplies, but availability remains below the five-year average.

Millie also highlighted domestic demand concerns surrounding bioethanol considering high feedstock costs, and animal feed especially considering challenges with Avian Flu and rising costs.

The domestic outlook also covered rising energy costs, suggesting that the floor of support in UK natural gas prices looks to remain, with forward pricing higher than spot, keeping fertiliser costs elevated. Though despite current elevated fertiliser costs, the Early Bird Survey figures for plantings and planting intentions show a further growth in winter cropping for harvest 23 from favourable autumn weather.

Here are the slides from yesterday’s GMO Conference session.

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