Without further escalation of tensions between Russia and Ukraine, operators are taking into account the arrival of harvests from the southern hemisphere, as well as a slight improvement in conditions for growing winter cereals in the northern hemisphere, although the road still be a long time until the harvest. World trade is not without surprises either, with renewed Russian selling pressure in wheat, and Donald Trump’s reiterated desire to tax products imported from Mexico and Canada.
In wheat, selling pressure from the Black Sea is still present
The rebound in wheat prices last week was ultimately only fleeting. Milling wheat delivered to Rouen fell by €10/t over the week, falling to €212/t. Without any new element supporting the escalation of tensions between Russia and Ukraine, operators’ renewed concerns are easing. In addition, it must be emphasized that Russian selling pressure is increasing, helped by the strong devaluation of the ruble against the dollar.
However, it is the Ukrainian, Romanian and Bulgarian offers that were best positioned to win the last two Algerian and Tunisian calls for tenders. If this sustained pace of exports from the Black Sea will limit their exportable supplies in the second part of the campaign, French cereals are nevertheless struggling to accelerate their exports. It should be remembered that the cooling of diplomatic relations with Algeria limits flows between the two countries.
On the plain side, French players are however reassured by the sowing of winter wheat now 93% finalized according to FranceAgriMer, and by the first growing conditions better than last year at the same period. The condition of crops is also improving across the Atlantic: the share of wheat in good or excellent condition climbs to 55% according to the US Department of Agriculture (USDA), compared to 38% at the end of October, after four weeks of consecutive increases. and a saving return of precipitation.
Finally, the world market is digesting the arrival of volumes harvested in Australia and Argentina. In the latter, the harvest is progressing quickly with now 39% of the country’s surface areas threshed.
French corn production raises some questions
After a brief return above €200/t delivered to Bordeaux around November 20-25, the gradual erosion of French corn prices in place since the beginning of October has resumed, now showing at only 194 €/t, the lowest level since the end of August. It must be said that the harvests are almost complete in the northern hemisphere, like the French harvest which shows a progress rate of 89%, making up part of its delay.
However, certain uncertainties remain. Already, certain sectors are raising the issue of mycotoxins, which could partly limit the use of national production in animal feed. Finally, we must quantify this harvest. The AGPM (General Association of Corn Producers) estimates French production of grain corn at 13.9 million tonnes, which corresponds to an increase of 10% over one year thanks to a sharp increase in the sole this year, but this figure is, however, lower than the 14.4 million tonnes projected so far by Agreste, the statistical service of the Ministry of Agriculture.
Despite these uncertainties, French corn needs to stimulate European demand. Moreover, it falls below the selling price of Romanian corn, which is rare enough to be underlined, but justifiable in view of the drop in production in Eastern Europe, but also all around the Black Sea. . Faced with this drop in availability in this region which meets the needs of the European Union, it will be very interesting to follow European imports over the coming months.
And all the more so at a time when international demand is dynamic, with the exception of China. Mexico is currently supporting US export sales when record weekly ethanol production is supporting US domestic consumption. Operators across the Atlantic are nevertheless cautious, after Donald Trump’s recent declaration that he wants to tax Mexican products at +25%, which could cool commercial relations between the two countries.
High volatility in rapeseed prices
The rapeseed market was once again marked by high volatility. After testing new campaign highs, prices have corrected significantly over the past 10 days, going from €546/t to now €504/t FOB Moselle. Prices have thus broken the upward channel in place since September to return to test the support zone of €500/t.
It must be said that rapeseed prices are strongly influenced by developments in the vegetable oil markets. Rationing demand for palm oil is underway in Malaysia and Indonesia following the surge in prices in recent weeks. However, the heavy rains in the palm groves raise questions about accessibility to the fields and palm yields in November. Balance sheets remain under pressure and the recovery in prices in Kuala Lumpur is currently limiting the prospects of a more significant drop in the rapeseed market. In this context, rapeseed oil is finding support around €1,050/t in Rotterdam, after a decline of -€139/t over the last ten days.
In terms of fundamentals specific to rapeseed, the joint decline in seed and oil is currently not allowing crushing margins to recover in Europe. Despite this, industrial activity has remained dynamic in recent months, reaching 1.7 million tonnes in October, or +7% compared to the average of the last five years. European balance sheets remain under pressure and import flows are monitored, particularly from Canada. Faced with the correction in canola, European rapeseed maintains a significant premium above $110/t compared to its Canadian counterpart.
In the longer term, it will be interesting to also look at Australia, where production volumes are expected at 5.5 million tonnes, in line with the five-year average. As such, local organizations StatCan in Canada and Abares in Australia will update their production estimates next week.
Comfortable soy balance sheets globally
The decline continues for the soybean meal market, which marks a new weekly decline of -2 €/t to stand at 372 €/t on the Montoir delivered spot. The situation is changing little and the global assessments remain heavy for the moment. First of all, in the United States, the end of the harvest allows us to confirm production potential close to the highest levels for 2021, above 121 million tonnes.
The arrival of these volumes has made it possible to accelerate American export sales for several weeks, particularly to China. Seed flows between the two countries remain under close surveillance before Donald Trump’s inauguration at the White House in January. United States trade policy could be decisive for price movements. On a local scale, demand is also dynamic with record crushing activity since the start of the campaign, increasing the availability of American soybean meal.
Added to this are the good production prospects in South America. Sowing is ending in Brazil and regular rains in the production area are reassuring operators. The same is true in Argentina, where plantings are progressing and 44% complete.
The good availability of seeds and cakes on a global scale facilitates supplies in Europe. Crushing activity was very dynamic in October, at 1.07 million tonnes according to Fediol, an increase of 18% compared to the average of the last five years. Soybean meal is increasingly competitive with rapeseed or sunflower meal and any acceleration in demand will need to be monitored.
Argus Media
(1) Argus Media, a company specializing in monitoring commodity markets, provides us with its weekly agricultural analysis.
To be continued: Evolution of the eurodollar parity; Devaluation of the ruble against the dollar; Competitiveness of French wheat compared to Black Sea origins; Growing conditions in the northern hemisphere; Progress in the wheat, barley and canola harvest in the southern hemisphere; Statcan (Canada) and Abares (Australia) reports; Tension on the global palm oil balance; Growing conditions for soybeans in Latin America; Increase in the global balance of soybean meals; Pace of export sales of American corn and soybeans; Rate of European rapeseed imports; Level of production and quality of the French corn harvest; Geopolitical tensions in the Black Sea.
