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- More rain needed
Following a period of beneficial rain for much of the UK, northern Europe and countries in the Black Sea region, world wheat markets continued to fall earlier this week. London wheat futures lost all gains made during March and April as wheat crop production worries reduced. Improved supply prospects weighed on prices as well as freshly published estimates for reduced demand due to the impact of coronavirus. The latest EU balance sheet from Brussels cut approximately two million tonnes each from both feed and non-feed demand. Although part of this was taken up by increased export trade, the effect is an increase in year-end stocks to 17 million tonnes – three million tonnes up on the year. However, towards the end of the trading week, wheat prices showed some degree of recovery. Insufficient rain arriving in the Balkans and southern Russia renewed production concerns.
- US corn drilling at a fast rate
In recent weeks, weather conditions have allowed US farmers to plant their corn crop at a fast rate, in contrast to last spring when continuous rain kept many off the land.
US farmers have been able to drill over half their intended corn area so far, reaching 51% of their targets to date in comparison to just 21% at this same time last year. The United States Department of Agriculture (USDA) expects the US corn area to be over seven million acres higher than last season. Prospects for a bumper crop have weighed on prices, coming at a time when ethanol production has almost halved. Despite this, US corn futures gained 3% over the week, helped by a rally in crude oil prices above $30 per barrel. Market sentiment was helped further as China stated it should not impose tariffs in retaliation to Trump's comments regarding coronavirus. This is encouraging news for US exporters.
- Exports and quotas
The EU and Ukraine continue to export wheat at a fast pace despite concerns that Covid-19 will impact demand. The EU shipments jumped by 800,000 tonnes last week, taking the total to 28.8 million tonnes. This figure is significantly above the 17.1 million tonnes shipped at this time last year and is well on the way to meeting end-of-season targets, which range between 31.5 and 32.5 million tonnes.
There are still almost eight weeks of the season remaining and Ukraine has now shipped 19.1 million tonnes of wheat, bringing it very close to its export quota of 20.2 million tonnes. Ukraine officials stated this week that they must be mindful of ensuring domestic food security. Taking this into consideration, they will review wheat export restrictions for 2020/21 and advise of any cap in July.
- May USDA report
The May World Supply and Demand Estimates report from the USDA is being closely watched in anticipation of the first balance sheets for next season. The market will be keen to see how the USDA views 2020/21 production prospects and its predictions for how demand will be affected by the coronavirus pandemic. This information will be released at 5pm next Tuesday and we will address the results in next week's Frontrunner.
- Falling malt demand
The impact of demand destruction in the malting barley world continues. Falling malt demand as beer consumption declines is causing uncertainty which will have knock-on effects into new crop. A lack of rainfall across northern Europe, in particular, raises questions about production. All in all, it remains a very uncertain picture for quality barley.
- Feed barley usage up
Old crop barley demand from UK compounders appears to be dropping away as the summer months approach and livestock are turned out. March usage figures released today by the Agriculture and Horticulture Development Board (AHDB) show reduced production of cattle feed but increased production of pig feed. Feed barley usage year on year is up 22% overall, which is not surprising given the pricing competitiveness of feed barley throughout this season.
- Good supply of feed barley at competitive price levels
With a good supply of feed barley still coming off farm at competitive price levels, we continue to see cargoes being offered from southern UK ports for May and June. It is important that this continues as the UK cannot afford to carry significant barley stocks into new crop. The potentially large size of the UK spring barley crop still weighs heavily on new crop values, particularly in the harvest position.
- European crop shrinking
We have seen mixed news in global oilseeds markets this week with US soybean export prospects remaining unpromising. The situation is not helped by ongoing tensions between the US and China and the Brazilian currency hitting an all-time low. Yet, these issues are counter-balanced by rising concerns over the quality of rapeseed crops in Europe and the Black Sea region. The market is now looking at a smaller EU crop for 2020, with current estimates coming in at less than 16.5 million tonnes.
Lack of moisture has been the recurrent theme in global oilseeds markets in recent weeks, but frost damage in south-eastern Europe has now been added to the mix. This does nothing to repair the damage on the demand side, but it does inevitably make growers reluctant to sell when their crops appear to be under stress.
- Price recovery
With UK physical rapeseed prices up £5 per tonne this week, we have now clawed back more than half of the £30/t price plunge that markets experienced during the first ten weeks of the year, as the impact of the global coronavirus pandemic became evident. Having digested a lot of change in recent weeks, traders are now looking for the next move and focus is concentrated on the upcoming USDA report on World Agricultural Supply and Demand Estimates. This is a monthly update and could contain some key data changes given the timing of its release.
It has been another quiet week in fertiliser markets. Demand is expected to remain low until the next wave of arable top-up orders approaches and grassland demand increases. CF Fertilisers and Yara prices remain unchanged. Meanwhile, there have been more discussions in the trade and on farms around what the new season will look like and when it might start.
Currently, there has been no update in the UK on the new season. However, Yara has released its June terms in France, Germany and the Benelux. Offers are lower than at this time last year and demand is yet to be known. On the urea front, we await another Indian tender later this week which might offer some direction on urea pricing for the next couple of months.
Blend demand in the arable east slowed again this week. Prices slipped lower with some suppliers looking at the bigger picture. There will be some quiet months ahead until harvest and yields are known. For an update on pricing, watch the currency market closely or speak to your Frontier contact.
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