- Volatile wheat markets
The impact of coronavirus continues to be the primary driver for financial and commodity markets. World wheat prices saw significant volatility this week, driven by exaggerated moves in foreign exchange rates and high nearby consumer demand. The Bank of England cut UK interests rates to a record low of just 0.1% and, with the British government introducing other financially supportive measures for the UK economy, sterling fell by 6.5% versus the euro. As a result, London wheat futures rallied to new contract highs for November 2020 and, from the lowest to the highest, achieved a spread in prices of £12/t. The euro also fell versus the US dollar, adding value to European wheat prices. Demand for bread products increased as panic buying cleared supermarket shelves, brought millers back to the market, and added weight to the increase in old crop wheat prices.
- China coming for US wheat
Another contributor to the volatility of wheat markets this week was talk of the US supplying wheat to China. There has been ongoing speculation of this since President Trump signed 'phase one' of his trade agreement with China back in January and it was reported that two cargos of about 120,000 tonnes of US hard red winter wheat had been sold – the first of such since 2017. US wheat futures rallied to their trading limits on Thursday on the back of the news.
- Mixed fortunes for 2020 wheat production
Mixed weather conditions are likely to result in changing fortunes for wheat prospects for the major producers in the 2020/21 season. The Institute of Agrarian Economics (IAE) estimated the Ukrainian 2020 wheat crop will be 12% lower than the previous year at 24.2 million tonnes. In addition, EU cereal organisation Coceral cut its wheat production estimate to 135.4 million tonnes. This compares with 145.7 million tonnes produced in 2019. Meanwhile, widespread rain and high domestic prices will see Australian farmers maximise wheat planting. The official estimate stands at 21 million tonnes, much higher than this year's 15.1 million tonnes, but private analysts have reported the potential for over 25 million tonnes. These analysts highlighted an increasing potential for US corn planting this spring, with estimates above 95 million acres compared to 89.7 million acres in the previous year.
- Currency benefits UK feed barley
UK feed barley benefited from a reduction in the value of sterling this week, increasing the competitiveness of export values on the global market as a result. However, sterling bounced back over the latter part of the week from lows of 1.058 against the euro as the government moved to reduce interest rates and introduce further financial measures to support the economy. Its current value remains much lower than this time last week.
- Government restrictions impact markets
The global malting barley market has been impacted significantly by the outbreak of coronavirus. The potential for unprecedented losses of demand is growing as more restrictions are imposed by the British government to slow down the spread of the virus. The postponement of all sport, implementation of social distancing measures and encouragement to avoid pubs, restaurants and other social gatherings will have implications for malt demand with little certainty of when normality might be restored at this stage.
- Crude oil markets crashing
Global uncertainty and instability led markets to move wildly this week, with the market oilseed fundamentals of supply and demand taking a backseat to macroeconomic forces. Crude oil prices have crashed by 60% this year to their lowest level since 2003 and some forecasters are speculating the possibility of a $5 barrel. The question is, how low does it have to go to reduce supply? Any further losses will directly impact the price of biodiesel which, in turn, will act as a drag on all vegetable oil markets.
- Support from weak sterling
UK rapeseed prices look as though they are going to end the week in positive territory. Currently, both old and new crop markets are trading at levels £13/t higher into the key Liverpool crush market. Much of this has been driven by the very weak performance of sterling. Mid-week saw the value of sterling depreciated 6.5% against the euro and, despite a recovery, it still looks set the finish the week at around 2.5% down. This accounts for about half of our market move, with the rest being down to a late rally in international markets and a transition towards a more 'risk on' approach amongst traders.
- Bean markets remain quiet
Given the current situation, trading of old crop beans has been very light this week. Domestic demand has effectively been shut off, with high prices forcing beans out of feed rations. Export to Egypt has slowed in the face of big supplies coming from Australia. The weakness of sterling prompted demand for a few containers of human consumption beans on Wednesday and Thursday. However, this was short-lived and, with limited supply, volumes were light. New crop feed beans traded higher, helped by firmer wheat futures.
- Planting conditions set to improve
With current improved planting conditions forecast for the next two weeks, it would be prudent to make some marketing commitments by selling beans or committing to the Frontier bean pool. Pool selling offers a much more flexible approach to tonnage marketed, as opposed to selling a fixed volume and price.
- Currency drives market
Currency has been the main driver in fertiliser markets this week and, with sterling at 35-year lows versus the euro and the dollar, markets have been reacting accordingly. This, combined with the potential impact of Covid -19 on supply chains, has led to a flurry of buying activity over the past seven days.
Blenders and importers are moving to a minimum 14-day delivery lead time, driving a large focus onto UK product.
With March delivery windows now almost full, CF Fertilisers has moved to April terms which are £5 higher. If currency continues to hold at these low levels and we see further delays on imported fertiliser shipments, this could move even higher in next few weeks.
Spring haulage is at a premium and this year could be further impacted due to external factors. Our advice is book now to have product available when required.
- Strong demand for spring seed
Drills are finally rolling across many parts of the country and, with an enormous area of spring cropping to go in, demand for spring seed continues to be strong. Spring barley seed supply is keeping up with demand and will be the most easily available crop for quick delivery to farm.
- Seed availability
Whilst variety options have shortened, seed of the most popular varieties like Laureate and RGT Planet can still be found. Spring wheat seed and spring bean seed are now effectively sold out, with only small quantities coming available as order patterns change. Stocks of spring oat seed, spring oilseed rape seed and linseed can still be found but variety options are becoming limited and subject to change.
- UK maize seed stocks under pressure
Maize seed has seen particularly strong demand as growers search for alternative cropping options. As a result, stocks of maize seed within the UK are now under significant pressure and reliant on international imports to bolster stocks. Securing supply of maize seed currently in the UK is strongly advised. Our seed delivery networks are working hard to get seed out to farm quickly and safely and are currently operating a "business as usual" service.
Given the uncertain picture ahead of us, we recommend placing seed orders as early as possible to maximise delivery opportunities.
Get in touch