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- USDA sees lower world wheat and corn stocks next season
Yesterday afternoon the USDA (United States Department of Agriculture) published their first world supply and demand estimates for 2018/19. They see lower year-end stocks for both wheat and corn and signal a changing picture for global grain supplies.
World wheat production is falling 10 million tonnes from the previous year's record, down to 747.76 million tonnes. Weather issues in Russia are the main reason, with their crop seen at 72 million tonnes, 13 million tonnes lower than their 2017 harvest record. This is offset by small gains in the US, Canada and Australia, but prolonged dry weather for each of those countries could leave their estimates difficult to achieve. World consumption is up 10 million tonnes and year-end stocks down six million at 264.33 million tonnes. However, the world stock situation looks tighter when you look at the detail of where these stocks are held. China will account for over 52% of the total and those stocks are not available for export.
Changes for world corn (maize) are more dramatic. Production is rising 20 million tonnes on the year to 1,056 million tonnes but consumption will increase by over 22 million tonnes, to a record 1,091.77 million tonnes. This will result in a drop in world stock of 35 million tonnes, down to 159.15 million tonnes, the lowest they have been since 2012/13 when annual consumption was 200 million tonnes less.
Overall, the USDA report is supportive. Weather and its impact on developing crops over the coming weeks will be watched closely. If adverse weather conditions compromise the potential of the USDA production targets, a bullish market picture will develop.
- Spring barley off to good start but very late
Sowing of UK spring barley was largely completed by the end of April and has had good rain since it was sown. With warm soils, those that held on from sowing too early have been rewarded with very quick germination of their seed and a vigorous plant. However, regular top-ups of moisture will be required with average air temperatures, to avoid stressing these young plants.
Conditions have been good for sowing in the Scandinavian region too and it is this origin that is holding malting premiums at the levels of £10 to £25/t. The lower premiums are in the high priced feed barley areas of the north and the highest priced premiums are for East Anglian supplies, where the feed prices are lower. All to play for as growers nervously await the second dose of rain to wash the last of the fertiliser applications in.
- Feed barley prices for new crop start out strong
This week has seen a good two-way trade on crop '18 supplies as decent bids by compounders have met with some farm selling. At £8 to £10 under wheat for the autumn positions, this is one of the smallest discounts to wheat pre–harvest for a number of years. Harvest is a more muted affair as there is no interest from our usual export customers at these prices, for barley from the south coast ports. Indeed Spain, our main customer, has bought several cargoes of cheap sorghum of late, that have been caught up in the tariff war between the USA and China. At 60,000t a time these vessels have caught the Spanish compounder's eye and therefore UK barley is off their buying list for now.
This week saw the USDA monthly WASDE (World Agricultural Supply and Demand) report. As per last month, the report pushed a lot of data into the market, which initially increased CBOT soybean futures. After some market consolidation, the report has had relatively neutral effects with CBOT soy futures, losing most of this gained value. Matif oilseed rape didn't see any of these benefits and opened $2.00 lower (Aug '18).
- Old crop
Argentinean soybean production was noted at 39mmt (-1mmt), with further possibility of downgraded production numbers due to rain during harvest. However, an increase of 2mmt in the Brazilian crop offset any potential effects of this. A weaker Sterling value towards the end of the week has slightly helped old crop values. The EU farmer is still holding high stocks of oilseed rape, partly due to decreased demand in the biodiesel industry, combined with unsatisfactory prices. These stocks are currently having a suppressive effect on domestic market prices.
- New crop
Dryness in Australia is causing issues with canola planting and their drilling window ends in ten days. Once again weaker Sterling values are helping out new crop prices. Analysts expect Brazil to overtake the US as the world's largest soybean exporter in 2019. This may largely hinge on trade discussions between the US and China. Next year the Argentinean harvest is expected to return to average levels (55mmt). The Black Sea region is now expected to receive more rain than previously thought. This should reduce potential rapeseed issues in the area, therefore increasing EU rapeseed stocks which would be associated with bearish effects.
The all important WASDE report gave the market plenty to think about, but in consolidation EU rapeseed prices are largely unchanged. The developing US – China trade issue remains the biggest factor in the global oilseeds complex.
CF's price adjustment has brought more business to the table, especially in the grassland areas. New cargoes of imported ammonium nitrate (AN) will start arriving in the UK over the next fortnight and indications are that new offers will be below £200/tonne.
Granular urea interest remains high, but initial offers of around £210/tonne, delivered in bags, is not attracting much firm interest. There is speculation as to whether the market will break the £200 barrier and all eyes are on Europe now to see if levels are fixed there first.
All of this activity is fuelling speculation of when CF will announce the start of their new season campaign. Many in the trade are now predicting a later start than last year, possibly not until the last week in May. What level CF opens at will be dependent on European nitrate prices and the prevailing urea price.
Whilst it is important to consider these early new season offers, please take time to talk to your Frontier contact about the best nutrition programmes for your crops. Don't forget to include sulphur, phosphate and potash in these discussions.
Foliar nitrogen on Oilseed Extra is being seen by many as a good way of topping up nitrogen supply to high potential crops that didn't receive full application of solid fertiliser earlier in the season.