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Last week's trade ended quietly with all markets posting small losses at the close. The London International Financial Futures and Options Exchange (LIFFE) was down £0.85/t, Marché à Terme International de France (MATIF) lost €1.50/t and the Chicago Board of Trade (CBOT) fell by $0.05/t.
There is some support for this current market but harvest pressures and Russia dominating international trade have left both Europe and the US around 25% behind last year's export pace for the same time of year.
President Putin recently met with Turkey's President Erdogan to discuss the Ukraine export corridor. However, given Ukraine's innovative efforts to export using alternative routes and the fact that markets are near contract lows, it is questionable whether there is an urgent desire to resolve the current issues.
The markets slipped further on Tuesday with LIFFE and MATIF posting further losses, albeit small ones. Russian wheat continued to set the marker for international trade, with FOB sales reported at around $25-$30/t under its theoretical floor price of $270/t. Russia sold around 300,000 tonnes to Bangladesh in an intergovernmental deal.
The markets fell on Tuesday before the World Agricultural Supply and Demand Estimates (WASDE) report was published by the United States Department of Agriculture (USDA). London futures were down £3.85/t, MATIF were €4.25/t lower and CBOT were down by $0.14/t.
When the WASDE report was released at 5pm on Tuesday, there were a few noteworthy outcomes. US, EU, Australian, Canadian and Argentinian wheat stocks are at their lowest levels since 2007, bringing global stock estimates down by seven million tonnes. However, there are queries over the EU stock figures and whether they have been reduced by too much. The markets reacted favourably on Wednesday following the report, as a consequence of the lower stocks. The gains continued on Thursday in London and Paris, with LIFFE closing up £2.75 and MATIF up €4.00.
UK feed barley values have followed wheat markets firmer this week, although price gains have been less significant than those seen in wheat. Feed barley prices had narrowed their discount to wheat values over the last couple of weeks due to a lack of farmer selling and short covering in the spot positions. However, farmer selling has increased over the past week due to feed barley bids around the country narrowing to less than a £15 per tonne discount to wheat and as a result became a more attractive selling proposition. The available feed barley on farm has increased in the last couple of weeks, with some spring barley being downgraded to feed from malting. As a result, feed barley will have to widen sufficiently to remain competitive in UK feed rations.
Barley exports are expected to reach roughly 200,000 tonnes by the end of September, which would be a relatively slow start to the export pace when compared to recent years. Most of the barley exported up until the end of September is winter feed barley, with UK malting exports normally starting in October. The slow export pace reflects the lack of UK competitiveness over the last few months. Feed barley from northern and eastern Europe has consistently undercut UK offers, especially into Spain which is traditionally the UK's largest export destination. Last year the UK exported 1.15 million tonnes of barley, with exports at approximately 300,000 tonnes by the end of September which highlights the slower start to Crop 2023.
The rapeseed market has continued in a downward trend this week, with UK ex farm values being approximately £30 lower during the last fortnight.
The reason behind this is a plentiful supply situation globally, particularly where European crushers have strong supply lines via domestic, Black Sea and other imported sources.
The effect can also be seen in the MATIF rapeseed futures, where the May period has stretched out to a €29 carry over to November. Other oilseeds and their products have also lacked inspiration recently, with soybeans, sunflowers and palm oil all trading lower in the same two-week period as demand isn't showing any sign of moving upwards and supply remains relatively comfortable.
Despite these negative factors, crude mineral oil is incredibly strong in the background and trading at levels last seen in June 2022 after the Organisation of the Petroleum Exporting Countries (OPEC) cuts in production. This should help biodiesel margins and increase vegetable oil demand flow.Plantings of rapeseed throughout Europe and the Black Sea are progressing well as conditions remain favourable for establishment. Overall, the planted area will likely be down due to lack of price incentive but with a large carryover expected again into next year, a reduction in area will help balance the supply and demand picture going forward, which will ultimately lead to higher values.
Bean values have risen this week and strong premiums, relative to wheat, are being traded. Farm selling volumes have remained consistent over the past two weeks and we are now starting to see beans from the North of the UK being cut and traded in larger volumes.
There are still uncertainties around Baltic bean quality, but yields are expected to be above average. This will lead to a significant supply of Baltic feed beans that will be competitively priced compared to those from the UK. Given this outlook, it is expected that the current strong premiums will not persist and now is a good time to take advantage of the high premiums while they last.
Urea markets continue to remain firm due to poor supply caused by Chinese production cuts and inspection delays on export cargoes leaving China for India.
Egyptian and Middle Eastern producers will be watching tentatively, as India is tendering again for another large quantity for quick delivery, with tenders to close on 15th September. Producers are unlikely to drop pricing in the short-term, especially on the back of the market firming over the past two weeks by $50 - $100 depending on the region.
Domestic nitrogen markets remain quiet as growers continue with fieldwork. Nitram terms are currently unavailable for new orders and imported ammonium nitrate offers are in short supply. Ammonia pricing has firmed over the past few weeks and European producers will be weighing up costs before offering new product to the markets.
Liquid UAN offers from all suppliers remain within the market for autumn and spring. These provide excellent value in terms of cost per kilogram of nutrient and the added benefit of applying sulphur at the correct levels throughout the application window. Please speak to your local farm trader or agronomist to ensure you are covered.
UK markets remain quiet, but stocks at ports are tight with replacement values continuing to remain firm. Phosphate exports out of North Africa are also firm due to South American demand, with smaller cargoes into Northern Europe currently taking a back seat. Potash remains stable, but any thoughts of downside in the market look remote given current supply issues.
Soil sampling feedback from across the UK suggests that phosphate, potash and pH levels are dropping. Remedial work will be required to restore indices to recommended levels in order to benefit future cropping. We advise that you liaise with your SOYL or Frontier contact to discuss options to rectify these issues.
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