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WHEAT
European prices have steadily declined to levels last seen in mid-September as a push of cheap exports from key producers has occurred. Egypt's General Authority for Supply Commodities (GASC) and Algeria have tendered for Dec/Jan wheat shipments with Russia leading the supply race by pricing significantly below competing origins. Continuation of Russia's wheat export pace (3.5 million tonnes per month) will hinge on the integrity of the grain corridor deal, which is currently the focus of the market.
The UN and NATO are rumoured to be lifting sanctions on the Russian Agricultural Bank (Rosselkhozbank), which would further boost Russian agricultural exports. There is also pressure from Turkey to extend the corridor deal for another twelve months. The market focus now turns to UN-Russian negotiations in Geneva today and to next week's G20 summit.
Thursday's World Agricultural Supply and Demand Estimates (WASDE) report from the United States Department of Agriculture (USDA) didn't deliver any real surprises, with most estimates in line with expectations. Globally, supply, consumption, trade and ending stocks figures were all increased.
World production is raised to 782.7 million tonnes with notable increases for the UK (up by 800,000 tonnes to 15.4 million tonnes) and Australia (up 1.5 million tonnes to 34.5 million tonnes) despite widespread flooding in some key wheat growing areas.
South America remains a key concern with persistent dryness forcing the USDA to lower its Argentinean wheat crop estimate by 1.5 million tonnes to a new total of 15.5 million tonnes, which still looks heavy against other estimates, which are closer to 14 million tonnes.
The report kept Russian wheat production at 91 million tonnes despite most estimates from the trade being closer to 100 million tonnes. The exports estimate remains at a huge 42 million tonnes, which would require an average of 3.5 million tonnes of exports each month to realise.
The UK picture remains heavy with a large crop and surplus chasing limited consumer demand. What looks like a continuation of lower demand in most sectors in the UK from livestock to ethanol means we will continue to follow global pricing trends. However, prices still remain relatively strong as questions around global supply reaching the market persist.
The USDA projects UK exports at 1.8 million tonnes which is roughly in line with most estimates from other sources, but there would need to be a real export pace increase for prices to be supported. At the current pace, we could see large stocks rolled into 2023 crops. With crops well established and well advanced, this could impact forward values.
BARLEY
It has been a relatively quiet week in the feed barley market. Feed barley has been seen trading in the forward positions, mainly as a result of merchants covering in their short positions. Compounders have been generally absent, waiting for consumer interest before pricing further.
UK malting barley continues to hold at attractive premiums. With the size of the exportable surplus and sluggish export pace, it feels like premiums will come under further pressure post-Christmas. Demand uncertainty remains prevalent, and it remains to be seen how the cost of living will impact beer consumption.
Looking forward to Crop 23, Frontier is offering a range of marketing options to help growers manage risk and market their malting barley crops. Guaranteed minimum premium contracts, futures related distilling contracts and malting barley pools are just a selection of the contracts we can offer. Please speak to your local farm trader for more information.
OILSEED RAPE
The latest USDA WASDE report shows little change in its South American soybean production estimate, which helped support the market. All other key production numbers were in line with market expectations.
There have been no further updates on the Black Sea export corridor agreement, which has been a key market driver in recent weeks. Meanwhile, South American planting progress is moving at an average pace, which has stopped any new concerns from arising.
Early rumours of China relaxing its Covid policies came to nothing, adding to selling pressure in the market. However, the market still has strong demand for vegetable oils. This increased demand is due in part to increased biodiesel production in the US.
Global rapeseed crops are now nearing completion for the 22/23 crop year. EU and Canadian production numbers are now near completion while the Australian and South American harvests are set to complete imminently.
With the South American crop being smaller than average, it is the Australian crop (7.5 million tonnes) that has become the market focus, especially as there is persistent rainfall in Australia. This new crop Australian seed is due to start flowing into the EU and UK from January 23rd onwards. After the Australian crop is harvested, the focus will be on how quickly it can be exported and whether a larger area of rapeseed will be planted again next year.
PULSES
Bean values continue to fall, losing £7-10/t last week. With the lack of demand both here in the UK and in Europe, values are expected to continue falling over the next few weeks.
The market now questions whether values will increase in the new year as they usually do. Values are expected to stabilise in the next few months, but this is dependent on the quality and quantity of the Australian bean harvest.
Over the past two years, the Australian crop has more than doubled in size due to excellent growing conditions. However, the recent heavy rains in the run up to harvest have had a significant impact on yield potential, which may generate demand from Egypt for UK beans.
FERTILISER
The nitrogen market remains relatively quiet with little activity. Ammonium nitrate (AN) offers remain limited, which is mainly due to lack of demand. It seems that most importers are reluctant to commit volumes in a quiet market. There have been one or two offers made, but it's likely that this is simply due to suppliers testing the market.
The recent drop in gas prices has prompted some European factories to resume production and the market awaits to see what effect this will have in the UK. It's speculated that although production will resume, European producers will prioritise supply into domestic markets before shipping any product into the UK.
The gas price could soon rise once a colder spell arrives on the continent, which may once again halt production in these factories and cause further volatility in the AN market. Most of these factories are buying their gas on a day-ahead basis, which means operations could change rapidly if the weather worsens.
Granular urea markets in the UK are relatively quiet. Levels had softened recently but have now stabilised. The next Indian tender is due shortly for December shipment and tonnage requirements are likely to be less than the previous tender, although it is likely that available tonnage will also be less.
As the cereal harvest draws to a close, we would encourage growers to review their requirements for the coming season as cropping is finalised. Growers who are planning to grow winter wheat crops to milling specification are advised that there are limited volumes of urea-based foliar products available for pre-Christmas delivery.
The UAN market remains quiet; values and product availability remain unchanged across all nitrogen and nitrogen sulphur grades. In recent weeks, large vessels have arrived across UK ports and replenished stocks, which will ensure security of supply through spring 2023 for growers with committed orders.
There has been little change in potash and phosphate prices in recent weeks, which is mainly due to lack of demand and buying interest. The recent price adjustment on potash is anticipated to be short-lived with only one producer amending prices and others not willing to go down to these levels. It is therefore expected that potash will firm again soon.
Growers who have purchased straight nitrogen only should consider Polysulphate or Potash Plus as a sulphur source.
Please keep in touch with your Frontier contact on market information and pricing to get your requirements covered.
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