MARKET WATCH• WEATHER: SNOW AND FROST IN THE

NORTH-WEST OF THE CORN BELT • CEREALS: THE FUNDS ARE BUYING

BACK THEIR SHORT MAIZE AND WHEAT POSITIONS IN CHICAGO

• OILSEED COMPLEX: RAPESEED IS DECLINING AGAINST OTHER PRODUCTS IN THE COMPLEX

• TALKS BETWEEN CHINA AND THE USA SEEM TO BE ON A BETTER FOOTING

• BULLISH TREND FOR WHEAT ON EURONEXT

NEWS

WEEKLY TRENDSWheat  Maize Rapeseed Sunflower Barley Meals

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ANALYSIS & COMMENTARYGRAINS ANALYSIS : Concerns about maize could lead to revisions for US maize in forthcoming reports. If so, there would be visible tightness for maize stocks with a price rise. Europe’s maize will be led by imported maize, with Ukraine’s very good harvest gradually reaching the market. With regard to wheat, rising Black Sea prices are likely to bring further opportunities for other exporting countries. Russian prices have already risen by over 8% since mid-September’s lull. This rise could therefore spread to the global market.

OILSEEDS ANALYSIS : The rapeseed market has breached its bearish trend and is heading straight towards its support level of €380/t on Euronext’s November 2019 expiry. The fundamental tightness in Europe is still there and could drive prices up in the medium term. Meanwhile, rapeseed oil is still too expensive when compared to other oils, justifying its price declines. With regard to soybean, uncertain yields in the USA, dry conditions in Brazil and good sales of US soybeans to China in recent days are all supporting factors in the short term. Canola is still trending up against a backdrop of ongoing uncertainty for the harvests in Canada and Australia. Oilseed complex prices are therefore likely to remain buoyant in the short term, given the very complicated weather conditions in North America.

ECONOMIC CLIMATETHE US FEDERAL RESERVE WILL NO DOUBT BE CUTTING ITS RATES AT THE END OF THE MONTHThere are increasing signs of economic slowdown in the USA and the risk of a US recession will probably encourage the US Federal Reserve (Fed) to cut its benchmark rate at its 30 October meeting. Unlike the European Central Bank, which has been unable give itself any room for manoeuvre by tightening its monetary policy, the Fed does have a certain amount of room to boost the US economy (see graph). The Bank of England may also be able to ease its borrowing conditions if the UK leaves the EU without a deal. This week’s last-chance European summit will be crucial. The UK prime minister’s positive meeting with his Irish counterpart last week has revived the possibility of a last-minute deal, with UK and European negotiators intensifying their discussions in an attempt to avoid the chaos of another extension.

FERTILISERSVERY FEW BUYERSFor lack of buyers, the prices of nitrogen fertilisers have contin-ued to decline over the past two weeks. Urea has therefore lost $10t/FOB and stood at around $250/t late last week. Prices are a little livelier this week and have risen by $6/t. The trade in base fertilisers is also limited on the international market, although India has purchased one ship of phosphate fertilisers from Sau-di Arabia. Despite all this, DAP prices are still declining on the international market as few buyers are returning to the market. With regard to potash, demand from Brazil has run out of steam and prices are not being underpinned – they are still therefore declining on the global markets.

TRADE WAR – PROGRESS AT LAST!Last Friday, President Trump announced that the USA had reached a partial agreement with China. This will therefore avoid the increase in import tariffs on $250billion worth of Chinese goods scheduled for this week and will bring some relief, albeit temporary, to this intermina-ble trade war. This agreement will now have to be formalised for signing in November. Under the terms of this agreement, China is thought to have committed to buying $40-50billion worth of US agricultural products and to exercising better control over its currency fluc-tuations. After months of conflict it had become a matter of urgency for both countries to reach even partial agreement, as the commercial damage caused by the slowdown in trade relations had become a cause for concern. Donald Trump, who, incidentally, is facing impeachment over the pressure exerted on Ukraine to undermine his potential Democrat rival, will no doubt adopt a more conciliatory stance in order to maintain his chances of winning next year’s presidential election.

STERLING HAS RISEN SHARPLY ON HOPES OF A BREXIT AGREEMENT

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GRAINS AND OILSEEDS

MARKET INSIGHTS & TRENDS

N°44 17 / OCTOBER 2019

MT

ONGOING CONCERNS FOR THE US MAIZE MARKETThe USDA’s last publication gave a surprise average yield of 168.4 bushels per acre, against 168.2bu/acre in September. Production therefore stands at 350.01Mt which is down slightly when the acreage figure is taken into consideration. North and South Dakota have, however, been hit by a cold snap with large falls of snow. According to the USDA, only 22% of the maize had reached maturity at 6 October in North Dakota and 36% in South Dakota, against 93% and 86% respectively by the same date last year. The potential impact of this problem is sufficiently serious to encourage funds to buy back their short positions and to bring a risk premium into the market. Traders are eagerly awaiting the USDA’s next publication. Elsewhere in the world, the forecast is still 36Mt for Ukraine with record yields of almost 6.4t/ha. With regard to wheat, the USDA has revised stocks for the main exporters up by 1.43Mt to 63.45Mt. The greatest change is in the US balance sheet, with production expected to fall by 0.5Mt to 53.39Mt, as announced in the 30 September report. US ending stocks are up by 0.8Mt to 28.4Mt with a downward revision in feed consumption and exports; this is still to be confirmed. The situation must still be monitored in Argentina, Australia, and also Canada where a large proportion of the crop is still in

the fields. With regard to exports, Russia and Ukraine are starting to leave greater market share to Europe and the USA. There has been a sharp price rally in the Black Sea, with Russian prices trading around the $200/t FOB mark.

With regard to barley, global sluggishness has again been confirmed by the USDA’s report, whilst demand from Saudi Arabia remains uncertain for the remainder of the campaign.

FOCUS ON… RECORD MAIZE EXPORTS FROM BRAZILBrazil’s exporters are beating records month after month, with 24Mt of maize now shipped between the beginning of the campaign and the end of September; by way of comparison, 8.4Mt had been shipped by the same date last year. After a very poor 2017/2018 campaign, Brazil’s producers have benefited from weather conditions that have been good for maize, combined with a 600,000-hectare increase in the harvested acreage. Given its major presence in the export arena at the beginning of the campaign, Brazil now has only 13.9Mt left until the end of February, which should provide opportunities for the other main exporting countries. Brazilian prices rose by almost $20/t FOB in September, which will allow US exporters to rejoin the race after a very disappointing start to the campaign.

Expiry Closes 15/10/2019 2-Week Variation

Euronext Wheat €/T December-19 178,25 3,00March-20 181,50 2,25

Euronext Maize €/T November-19 164,00 -0,75January-20 170,00 0,00

Chicago Wheat c$/bu December-19 507,00 8,25March-20 513,25 7,50

BRAZILIAN MAIZE LEFT FOR EXPORT (TONNES)

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MAIZE GRAINGRAINS

UNCERTAIN WEATHER VS COLLAPSING VEGETABLE OILSThe oilseed market is split between vegetable oils that are losing ground and a volatile period called a weather market. Palm oil prices have been dropping since last week in Kuala Lumpur, with India threatening to introduce import duties. Rapeseed oil is collapsing, especially as the price spread seems very wide with palm and sunflower oils in Rotterdam. The sluggishness of the sunflower market is also putting pressure on vegetable oils prices, especially in Ukraine whose harvest is expected to be over 15Mt. Against this backdrop, the price of rapeseed seed saw a bearish correction late last week – it has breached its bullish trend and is heading towards the €380/t support level on Euronext’s November 2019 expiry. Despite all this, there is no shortage of supporting factors. In the USA, stocks of soybean have been reduced by the USDA and production is also forecast to be down when compared to last month at 96.6Mt, against 98.8Mt in September – the lowest level since 2014. Furthermore, the harvests are late because of bad weather, especially in the northern USA where here has been some snow – over 30cm in North Dakota for example. It is the same scenario for Canada with just 25% of the canola acreage harvested in Alberta and 40% in Saskatchewan when the harvest should be drawing to a close. Lastly, Australia is still experiencing dry conditions and the canola harvest

could even drop below last year’s 2.2Mt to reach a 10-year low. Against this backdrop, the major uncertainty is encouraging US funds to buy back their short positions in Chicago. Another point to monitor is that the trade talks between the USA and China seemed to be improving late

last week, but now seem to be going nowhere again after China declared that it wants to negotiate further. In the longer term, the soybean market will also be penalised by a fall in Chinese imports, with African swine fever having already devastated over 40% of China’s pig population.

Expiry Closes 15/10/2019 2-Week Variation

Euronext Rapeseed €/T November-19 383,75 -2,25February-20 384,75 -2,00

Winnipeg Rapeseed C$/T November-19 461,40 9,20January-20 470,20 8,90

Chicago Soya c$/bu November-19 934,00 14,50January-20 948,50 16,00

FOCUS ON… MAJOR IMPORTS OF SUNFLOWER OIL IN EUROPEThe Black Sea’s very good sunflower harvests are ongoing and bringing some sluggishness to the vegetable oils market. Russia is likely to harvest almost 14Mt and Ukraine over 15Mt this year. With the European rapeseed market tight, sunflower oil imports from these two countries are being encouraged. The price spread between rapeseed and sunflower oils is close to record levels at over $150/t FOB in Rotterdam. European imports are therefore at their highest level for the last five campaigns, with 450,000t of sunflower oil imported since the beginning of the campaign (240,000t by the same date last year). These factors are therefore slowing the demand for rapeseed seed, with the use of rapeseed oil in human food currently at minimum levels.

EUROPEAN IMPORTS OF SUNFLOWER OIL (TONNES)

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SUNFLOWEROILSEEDS

TECHNICAL POINT

BRAZIL’S MAIZE EXPORTS HAVE BEEN BUOYANT SINCE THE BEGINNING OF THE YEAR

BRAZIL'S MAIZE EXPORTS

TWO MAIZE CROPS Brazil produces and exports two different maize crops. The first crop, safra, is grown in summer between September and March. Originally this was the main crop. Brazil has, however, sharply increased the production of the second crop, the safrinha. This is generally sown after soybeans, between February and July. The gradual increase in Brazil’s soybean acreage, however, has encouraged farmers to sow an increasing amount of second-crop maize. The safra crop is mainly used for domestic consumption, whilst the safrinha is mainly for export.

BUOYANT EXPORTS Brazil's exports have been extremely buoyant over the past few months. Safra exports between March and June were up sharply on previous years: total exports between March and June are almost four times higher than during the same

period last year. Exports of safrinha maize since July are at record levels for July-September: 7.5Mt were exported over this period last year, but 20.4Mt had been exported by the end of September this year. The situation in the USA at the beginning of the year has allowed Brazil to export more on the international market.

Corn Belt states had really bad weather during the maize-sowing period in April-May. This posed great difficulties for US farmers, delaying the sowings by several weeks. Remember that the USA is the world's largest producer of maize. As a result of this period of concern for US maize production, maize prices soared in Chicago. They remained high because of ongoing uncertainty on the US market. US maize was too expensive when compared to Brazilian maize over the first few months of the year and was therefore not competitive enough on the international scene. Incidentally, this competitive advantage for Brazilian maize was also boosted by a low real–dollar exchange rate.

BRAZIL’S MAIZE STOCKS FALLBrazil's record maize exports are likely to tighten the country’s balance sheet for this cereal. The FOB Paranagua price of maize has therefore risen sharply since the beginning of September (nearly 15%). In its October report, however, the USDA increased its figure for Brazil's 2018/19 campaign opening stocks of maize by 1.79Mt. Despite this report's 1Mt increase in exports, its figure for consumption in animal feed is down by 1Mt, which does not alter the total usage level. Ending stocks for the 2018/19 campaign, however, are therefore up by 1.79Mt to 7.28Mt – their lowest level since the 2015/16 campaign.

Safra exports Safrinha exports

EURALIS SEMENCES / AVENUE GASTON PHOEBUS 64231 LESCAR CEDEX - FRANCETEL. + 33 (0)5 59 92 38 38 / FAX. + 33 (0)5 59 92 54 51 - www.euralis-seeds.com

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