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Weekly Commodity Report w/e 18th May 2018

UK wheat market continues to be a story of two halves that just manage to remain connected.  Old crop wheat becomes increasingly difficult to source with spot prices remaining high and quantities available small.  While conditions look good currently for the new crop the price continues to follow the old crop up.  Longer term this increase is unlikely to be sustained on the new crop wheat with continuing positive weather and temperature conditions forecast over the last ten days.   Currently Nov 18 UK wheat contract sits around £151.80/T and on a rise.


EU wheat gained some ground over the last few days also, thought to relate to gains in the US dollar helping EU wheat look more competitive for export.   FranceAgriMer increased its 2017/18 soft wheat export forecast within the EU from 8.9 Mln T to 9.1 Mln T (a 12 year high).   Beneficial rain on the US Plains and in the black sea may reduce these gains going forward.   Talk of a reduced 2018 supply in both of these areas may drive prices up in the longer term.  Germany lowered their 2018 wheat areas by 5.6% but farmers seem reluctant to sell with the futures prices lower than predicted.   With Saudi Arabia set to trial Russian wheat new crop export potential to Saudi Arabia from Germany, and EU in general, could be limited.  Russian Grain Union are said to be targeting 1-1.5 Mln T of this export over the season.  US export figures look equally dismal with this week’s export inspections forecasting a 12% decline on US wheat exports compared to the same time last year.   With the USDA showing US maize and soya exports estimates both also in decline by similar amounts and the AHDB reporting tighter global stocks in 2018/19 due to increasing demand and difficult growing conditions in many influential areas worldwide the current commodities markets are changing. 


Soya bean markets are undergoing a liquidation phase as uncertainty continues around the US China trade negotiation.   This is combined with weakness in the Brazil Real has driven a period of sales by producers lead to losses in the price of soya.   Brazilian soya beans were being offered for export at prices below those of the US as China demand became less urgent as lower demands into Chinese animal feed are sparked by loses in pork prices to below the cost of production.   Private analyst groups estimated this week that there would be an increase in the US soya bean acres figures given in March.   With similar messages heard for global corn, soya and wheat yields resistance is likely in prices.   US soya bean exports were vague at between 300 and 500 Mln T likely due to uncertainty of the final destination for cargos previously destined for China.


The world is becoming ever more  complicated.  Plastics have become a huge issue; the world has produced over 250 Mln T of plastic every year since 2010, peaking at 335 Mln T in 2016 (latest available data).  So in order to become more environmentally friendly, biodegradable plastics are being made from soya.  By an odd coincidence, the world will produce 335 Mln T of soya beans this year, which puts the plastic mountain into perspective.  In 2011 soya-plastic appealed to car manufacturers who were overly dependent on the oil industry – plastic dashboards, door furniture, seat covers, upholstery and insulation, let alone the fuel and oil.  In fact bioplastic was cheaper, so used by most industries and the demand has boomed.  Unfortunately, those bioplastics are quite attractive, tasty and accommodating to rodents, with all the resultant problems.  Moving in the opposite direction, food retailers are desperately trying to reduce the usage of soya in their supply chains in order to preserve the rainforests.  So the strategy of reducing petrochemical plastic could increase the use of soya which is deleterious to the rainforests which the world is trying to protect.