- Weather and politics send markets lower
Changing weather conditions brought rain to the UK and the near continent this week. This was seen as beneficial for wheat crops and triggered a fall in French and London wheat futures, pushing them down to fresh contract lows.In recent weeks, new crop wheat prices have traded in a narrow range, supported by prolonged dry weather conditions which were affecting crops in much of Northern Europe. With memories still fresh from last year's extended drought conditions, there were concerns that yields could again be severely impacted by a lack of soil moisture. This week's rainfall has brought welcome relief to crops if not prices. French winter wheat crop ratings remained unchanged on the week at 79% good/excellent, which is slightly ahead of the 78% this time last year.
EU wheat prices were also pressured by falling US wheat and corn futures markets. US winter wheat conditions continue to maintain their high condition ratings, with 64% seen good/excellent compared with 34% at the same time last year. Despite a near record fund short, concerns that excessive rain will delay plantings and reduce yields have failed to spark any notable price rally. On Monday the USDA reported that just 23% of the corn crop had been planted compared to 36% last year but the weather forecasters now see a clear window of opportunity to drill next week. The US corn export pace is still 10% behind last year and President Trump's latest politics are unlikely to improve the situation. With no resolution to the US/China trade dispute, Chinese products now imported into the US will incur a 25% tariff, increased from 10%. Fears that there will be a retaliatory move to block imports of US agricultural products in to China sent CBOT futures tumbling. Alongside this, Brazil increased its corn crop to 95.25 million tonnes; up from 94 million tonnes previously.
- USDA first look at 2019/20
At 5pm, the USDA will publish its May World Supply and Demand Estimates and, in addition, their first look at world wheat and corn balance sheets for 2019/20. Most observers see this report reinforcing the current bear trend but we have seen surprises in the past. We will provide a summary for this outlook for next season on Monday 13th May.
- New crop prices decline on feed barley
A combination of lower world wheat and corn futures, plus improved yield prospects, have caused sellers to lower their prices on the world market this week. On Monday we saw the results of the latest tender by Saudi Arabia to buy 840,000t for arrival over the July – August period. Successful prices were around US$10/t less than the previous sale for 60,000t ship sizes at 14%M. Black Sea supplies are thought to be the ones that will fill up the vessels. Meanwhile, back in the UK we have seen little forward compound demand. This comes after the flurry seen a month ago, when pig producers bought rations on the back of demand from China to replace their own supplies of pig meat. These are much reduced by their African Swine Fever outbreak.
- Rain improves spring barley conditions
With up to 25mm of rain this week coupled with last week's downpours, most spring barley crops have responded well to the much needed moisture. However, with few ground water supplies apparent, spring barley roots are reliant on what falls out of the sky now. This of course has meant lower values over much of the EU than those of last week as rains were widespread, but at least domestic brewing maltsters are now able to cover some of their malting sales where they were not able to before.
In the east and along the South Coast, significant and regular rainfall is still needed as soil moisture deficits remain high.
- Flat domestic prices
We've seen no change in domestic physical prices over the course of the week as markets await today's USDA Supply and Demand report and any resolution to the long running trade dispute between the US and China. World oilseeds markets started the week defensively when President Trump, reacting to signs that China wanted to renegotiate some key elements in the proposed deal, raised tariffs on $200 billion of Chinese goods from 10% to 25%. US soybean futures are viewed by many as the benchmark for global agricultural oil markets and this week we saw the nearby contract dip below 800c/bushel for the first time since December 2008.
- Global markets relaxed
The US remains well behind with its spring plantings due to wet field conditions. However, market tension has eased in the last few days based on forecasts for dry weather in the Midwest over the period 10th – 19th May. US export volumes remain behind the pace, with little optimism that much will change in the short term. China's domestic production of soybeans is forecast to increase next year but, in the meantime, African Swine Fever is cutting their pig herd (and therefore feed demand) by a significant 10%.
- Weather encourages new crop sellers
The recent rainfall across most areas of the UK, combined with a forecast of warmer weather on the way, has bought a number of new crop bean sellers to the market. This is keeping a lid on prices and, in some regions, resulting in price falls of new crop beans. Despite these, new crop beans are still far too expensive for most UK feed compounders who can buy other mid-range proteins at far more competitive levels. With unknown bruchid levels and increasing crop potential, feed bean values will need to fall at least another £10/tonne before feed beans become competitive for compound feed buyers.
The weather has significantly helped with the uptake of recently applied nitrogen, giving crops some real potential. Demand for nitrogen is still ongoing to many parts of the UK, especially the grassland areas. Final dressings onto wheats are just about done, apart from in the milling wheat area. Final applications and foliar dressings are still to come.
The market for UK Nitram/Extran remains within a band around £260-£270, depending on the order size and haulage rate. Imported 34% AN is very limited, with only a few cargoes around and no talk of new season imports as yet. There were talks of a European AN price this week which would indicate a premium to last year's new season level. Granular urea markets remain firm, with Indian tenders taking any surplus urea out of the market.
Some reset of the TSP market in France has led other markets to look to suppliers to reduce TSP levels but with little traction. The French market found a source of TSP from a previously unavailable source which quickly disappeared. Currency has helped a little on TSP and DAP, with DAP prices slightly less than this time last year so possibly worth a look. MOP remains unchanged, with very little chance of any reset in this sector. The loss of compaction capacity in the UK, along with similar losses in Germany, may mean a limit to MOP in the year – especially with a global increase of circa 1- 2% per annum coming mainly from Brazil.
- Foliar applications
As oilseed rape starts to drop petals we are nearing the time to apply the last 40kgs of nitrogen to the crop. As always, at this time of year speak to your Frontier contact for more information.
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