UK prices could be influenced by outlook for South American crops: Grain market daily

• UK feed wheat futures (May-25) closed yesterday at £187.95/t, gaining £0.50/t from Monday’s close. New-crop futures (Nov-25) gained £2.10/t to close at £200.00/t.
• The domestic wheat market followed Chicago wheat futures higher yesterday, driven by concerns over cold weather threatening crops in Russia and the US.
• May-25 Paris rapeseed futures closed at €533.00/t yesterday, gaining €3.75/t from Monday’s close. The Nov-25 contract rose €4.50/t over the same period, ending at €500.00/t.
• Rapeseed was supported by Chicago soyabean futures (May-25) which gained 0.26% yesterday, supported by Trump not yet imposing tariffs on major importers.

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Grain and oilseed market movements over the past month have been partly driven by South American weather. Argentina has been hit by a prolonged drought causing crop losses, while late planting and wet weather are slowing down Brazil’s soyabean harvest, which may have a knock on impact on its second maize crop plantings.

Brazil is the largest exporter of soyabeans and second largest exporter of maize globally. While Argentina is the third largest global exporter of maize, it is the biggest exporter of soyabean oil and meal. Together, these two countries account for 15% of global maize production and 52% of soyabean production. Any changes in their output can have a significant impact on global prices and therefore domestic prices.

Argentina

Recent rainfall in Argentina eased drought conditions but the rains were not sufficient enough to reverse crop losses. In the February WASDE report, the USDA lowered Argentina’s 2024/25 maize production forecast to 50.0 Mt, down 1.0 Mt. Last week, Argentina’s Rosario grains exchange also revised its maize production estimate down by 2.0 Mt on the month and 6.5 Mt down on the year to 46.0 Mt, due to further declines in crop conditions. The exchange also released its first estimate for soyabean production of 47.5Mt, down 2.5 Mt on the year. According to data from the Buenos Aires Grain Exchange, as of 12 February, 33% of Argentina’s maize crop was rated as poor/very poor, compared with 26% a week earlier and 17% at this point last year. For soyabeans, 36% of the crop was rated as poor/very poor, compared with 32% a week earlier and 17% at this point in 2024.

The outlook for the next seven days is for further dry conditions in Argentina, which could exacerbate crop conditions further.  

Brazil

The USDA's projection of a record 169.0 Mt soyabean crop in Brazil has been a key factor supporting global supplies and underpinning the market. However, the slow start to harvest due to late planting and recent adverse weather has raised concerns about the crop's potential. Conab (part of Brazil’s agricultural ministry) has reduced its crop forecast by 0.3 Mt to 166.01 Mt.

Brazil’s second maize crop (Safrinha) planting depends on how quickly soybeans are harvested. Currently projections for the 2024/25 maize crop are 122.01 Mt by Conab and 126.0 Mt by the USDA. Delays in soybean harvesting could push back Safrinha planting, potentially impacting its yield and the area planted. However, over the next week, less rains are expected in Brazil, which will aid in the progression of the soyabean harvest.

Conclusion

The global soybean market remains stable. In its February estimates, the USDA projected stocks from major exporters (Brazil, US, Argentina, and Paraguay) to reach 68.2 Mt by the end of 2024/25, a 6.6 Mt rise on the year. Although this is 4.0 Mt lower than its January estimates, with Argentinian stocks down 3.0 Mt and Brazilian down 1.0 Mt. Weather forecasts are favourable for Brazil's soybean harvest, but further stock cuts in Argentina and Brazil could increase market volatility, which could influence UK rapeseed prices.

For maize, the drought in Argentina has recently added upward support to global prices. The USDA forecasts global maize stocks to hit a ten-year low of 290.3 Mt. With more weather risks ahead, further cuts to maize production in Argentina and even Brazil, could tighten global supply and support global markets, including domestic wheat prices.

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