The United States Department of Agriculture (USDA) published its December World Agricultural Supply and Demand Estimates (WASDE) report on Thursday, presenting a bearish set of wheat data. World production is seen 2.61 million tonnes higher than last month at 777.89 million tonnes. Overall, wheat supplies are seen up 4.3 million tonnes with increased carry in from last season. Production volumes reflect recent official revised estimates which have seen many increases since figures were previously released.

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WHEAT

  • Bearish numbers from the USDA

The United States Department of Agriculture (USDA) published its December World Agricultural Supply and Demand Estimates (WASDE) report on Thursday, presenting a bearish set of wheat data. World production is seen 2.61 million tonnes higher than last month at 777.89 million tonnes. Overall, wheat supplies are seen up 4.3 million tonnes with increased carry in from last season. Production volumes reflect recent official revised estimates which have seen many increases since figures were previously released. The estimate for Australia is up to 34 million tonnes from 31.5 million tonnes, for Canada it is up to 21.65 from 21 million tonnes and for Russia it is up to 75.5 million tonnes from 74.5 million tonnes. Increases in world consumption are just short of two million tonnes higher at 789.35 million tonnes, leaving stocks ahead of the trade expectation of 278.18 million tonnes and 2.38 million tonnes up on last month.

Futures markets have slipped lower this week with speculative long holders in "risk off" mode, reacting to the uncertainty brought on by the spreading Omicron variant of Covid-19. The bearish USDA report encouraged further selling and led to futures dropping to levels 8% below last month's record highs.

  • Corn more resilient

Chicago Board of Trade (CBOT) corn futures shook off bearish USDA data and, in contrast to wheat markets, closed with gains following the report. Production increases for Ukraine and Argentina take world production estimates to a new record high of 1.208 billion tonnes. However, coinciding increase in demand leaves end stocks projected at just one million tonnes above last month at 305.54 million tonnes. This, if realised, is almost 13 million tonnes up on the year and, on the face of it, bearish. However, the estimates are relying on records to be broken in South America for corn crops that aren't yet all planted. Argentina is expecting four million tonnes more than last year at 54.5 million tonnes and Brazil is projected to achieve 118 million tonnes, which is 31 million tonnes more than last year's weather-troubled crop. Beneficial weather is key, particularly through the first quarter of 2022.

Corn markets were also encouraged by the reported sale on Wednesday of 1.84 million tonnes of US corn to Mexico. This is the sixth-largest single US corn sale since records began in 1977 and the largest ever sale to Mexico.

  • Argentina wheat estimates rising

The December USDA WASDE report left production estimates for Argentina unchanged at 20 million tonnes, which is up from 17.3 million tonnes last year. Timely rains during the key growing cycle have boosted yield potential and, with the harvest over half-completed, local production estimates are rising. The Buenos Aires Grain Exchange (BAGE) has increased its estimate from 20.3 to 21 million tonnes and the Rosario Grain Exchange has gone even further; its estimate is up to 22.1 million tonnes. The USDA sees Argentina shipping 13.5 million tonnes of wheat this season, but with just 6.5 million tonnes of domestic consumption, the additional supplies seen by others should increase those available for export when the world's major importers need it most.

BARLEY

  • Prices settle back after Christmas deliveries resolved

Consumers of feed barley have now largely covered their requirements for December and early January, although transport may not yet be arranged as logistical challenges remain. Livestock producers and their feed suppliers are only buying for February onwards and at a slow place, as they assess potential price points and demand. Barley seems quite tight on farm in the eastern side of England where demand has been high due to the extended stay of pigs on farm and reasonable levels of exports out of the East Anglian ports. Elsewhere, some supplies remain, but haulage has become generally more difficult to book which makes merchant sellers reluctant to sell.

  • End of season prices look set to remain stable

Due to the limited weight of unsold barley in England and the lack of cheaper alternatives, the outlook for values looks set to remain flat until the end of the season. It feels there is going to be good demand for wheat due to the lack of industry cover in the forward months, which should raise wheat prices and subsequently raise premiums over feed barley. This should prevent barley values from falling sharply. Where there is demand, UK barley remains the cheapest to Spain or Ireland.

  • Weather conditions and political tension should make for an interesting spring trade

Weather is having an effect on market sentiment currently. Record rain in eastern Australia, very warm spells in the USA and ongoing dry conditions in northern Argentina and southern Brazil are all currently at play. UK crops look good to great with crops in the western EU in similar condition. Australia looks set to produce a large crop of modest quality and many of its export loading positions are already taken up, which means further supplies cannot be had within the next four to five months. It is likely that the tension caused as a result of happenings on the Ukraine/Russian border will send EU prices up, as sales from Black Sea origin would need to be executed for the EU. The market is set to be volatile for some time in light of these circumstances.

​OILSEED RAPE

  • New contract highs

It's been a nervous week of trading ahead of the release of the December WASDE report from the USDA. French rapeseed futures hit a new contract high on Thursday at €722.50/t, but all the strength continues to be in the nearby positions with the large Australian crop - at over 5 million tonnes - not far away from arriving on UK shores and the prospect of a much larger Canadian and European rapeseed crop in 2022 predicted to lead to a heavy €160/t discount by this time next year. UK old crop domestic prices are up by over £50/t since the start of this month and new crop has gained £25/t which is an impressive performance given that this week the French Ministry of Agriculture and Food forecast plantings up 12% - up to 1.1 million hectares - for harvest 2022. However, this is still well below the five-year average and traders are well aware that a massive recovery in Canadian production is needed to replenish low global stocks.

  • USDA report neutral for oilseeds complex

Global soybean prices have been on a six-month bear run, with prices on US futures markets dropping by 14% over this period. This shows the current disconnect between soybean and rapeseed markets, which makes interpretation of this week's USDA report particularly difficult. Most of the focus from the oilseeds perspective is on the soybean numbers, although it looks as though any revisions to South American crop levels due to dry conditions triggered by the La Niña weather phenomenon have been left until the January report. US year ending stocks were projected at 340 million bushels, which was a little less than expected, and markets were a few cents higher in early post-report trading.

 PULSES

  • UK seeks volume buyers of feed beans

The challenge remains in the UK to find volume buyers of feed beans, especially in the south of the country. With fixed feed demand in the UK, we still need to find export demand for nearly 100,000 tonnes in order to move this year's big crop. In the north, market values are dominated by a very strong human consumption market. However, with limited supplies, it's unlikely the UK will be able to ship enough food beans to make a real dent in this year's UK crop, which sits at over 700,000 tonnes.

New crop bean values continue to follow wheat and despite a lot of autumn-planted beans going into near-perfect conditions, the premium to wheat is still holding up well. In the event of an open spring with good sowing opportunities, it is likely these will come under pressure.

 FERTILISER

  • AN/urea

The CF Industries Ince plant in Cheshire came back online this week after closing back in September 2021. This is great news for the UK agricultural industry and fertiliser supply in a very tight market. Production will concentrate on the outstanding nitrogen sulphur grades DoubleTop and SulphurGold in the first instance. Any further production of NS grades will hinge on the market and supply of gas and ammonia. Currently, UK gas values have been slowly increasing as demand has grown on the back of the much colder stormy weather.

In other news, Brazilian fertiliser imports for the year so far are 11% ahead year-on-year, explaining why some of the markets have been very firm. More demand is still to come from Brazil and India in the next few weeks. Some nitrate production has come back on stream within Europe but, with the rising gas values across Europe, it's uncertain whether this production will be sustainable.

  • UAN

Regional UAN terms and grades are still available as we approach the end of the calendar year. Suppliers and shippers are keeping a close eye on any escalating tensions between Russia and the Ukraine as this could impact any fresh shipments of UAN arriving in the new year.

Growers are urged to cover any outstanding requirements well before the usage period. Tight supply and demand already exists, with the full extent of increased winter cropping as yet unknown on the traditional 'top-up' market.

  • PKs

The recent storms have disrupted shipments of phosphate and potash to the UK, pushing more deliveries forward to the new year. This is not good news; the delayed production at CF Fertilisers and delayed shipments will put even greater pressure on January 2022 logistics. Covid-19 and the price of diesel will also remain an important factor for consideration as we get closer to spring demand.