European market
Already driven by delays in the progress of sowing in Ukraine and a dry situation in southern Russia, wheat prices were up on Euronext yesterday. The end of the session was marked by the release of USDA's quarterly stock report. The decline in wheat quarterly stocks in the USA accentuated the upward movement, allowing the wheat prices to return to its highest level since August 2018 closing by +5.50 €/t for December 2020 contract. The increase is also observed in the following contracts in lower proportions in a context where new export demands are reported.
The rise in wheat prices is pulling corn prices in its wake. Corn prices are increasing at a slower pace than wheat prices. Despite the return to the levels of last week for the November 2020 contract, the price spread between corn and wheat on Euronext is widening again. In terms of the progress of the harvest in France, the impact of the winds announced this weekend should be watched.
The increase was also observed in rapeseed where prices rebounded on the support level of 380 €/t on the November 2020 contract on Euronext. The rapeseed market is benefiting from the increase in soybean prices. However, operators remain vigilant on the evolution of vegetable oil prices with palm oil price that rebounds moderately. The crude oil market is for the moment struggling to go back above 40 $/b in New York.
American market
The US market showed a strong increase yesterday in all products, driven by large funds’ purchases following the release of quarterly stocks and the production outlook for wheat 2020. First of all, the downward revision of quarterly stocks in corn affecting the 2019/2020 MY led to the rise in Chicago. The corn ending stock is down sharply to 50.7 Mt against 57.2 Mt initially estimated by the USDA in its latest publication. Already sustained by strong export demand, demand for animal feed also tightened the US balance sheet. After a session with a strong upward trend, just like the June 30 session, corn prices on the December 2020 contract in Chicago were trading back to their highest levels since last March.
The situation is similar in soybeans, where stocks on September 1 are displayed down at 14.2 Mt. It’s -9% less compared to the previous USDA estimate. Chinese demand was strong during the last months of the 2019/2020 MY in the USA. This drop in volumes tightens the 2020/21 balance sheet as harvests begin in the USA. Prices for the November 2020 contract are back above 10.3 $/b, approaching their highest level since September 18.
The upward movement was also observed in wheat. The prospect of a crop in line with expectations has taken second place to the decline in quarterly stocks. As a result, the volume in stock is down by -8% compared to the same period last year. Chicago prices rose sharply, pushing the December 2020 contract to return at the end of the day to its highest level since February.
Black Sea market
The return of rains over Ukraine is intensifying with another day of significant rainfall yesterday. This trend should be confirmed in the next few days. Even if the level of surface soil moisture will encourage producers to speed up the sowing rate, a significant decline in rapeseed acreage already seems inevitable. Usually, farmers seed very little rapeseed after October 1. Under these conditions, the harvested area in summer 2021 should hardly exceed 620,000 ha currently sown. The production could be lower than 1.5 Mt vs 2.5 Mt this year and 3.5 Mt in 2019.
