- Sterling firmer on election result
Sterling reacted positively to the UK election result, gaining up to 2% versus the euro as the Conservatives secured a majority of at least 78 seats. However, this currency move is negative for wheat prices as it makes imports cheaper and exports more expensive. Wheat prices have had to adjust to counteract this, with London futures easing lower on Friday morning. Nevertheless, the fall in UK prices was limited as European and US markets moved higher. US wheat futures rallied on more positive news over the US trade dispute with China. It was reported that the US would suspend tariffs on $160 billion in Chinese products from this Sunday and that China would agree to buy $50 billion in US agriculture goods in 2020.
- Muted market impact to the USDA
On Tuesday, the United States Department of Agriculture (USDA) published its December World Agricultural Supply and Demand Estimates. The report shared no surprises and there was limited market impact. Overall world wheat production was seen 140,000 tonnes lower on the November report, although there were a number of changes within that. Argentina, Australia and Canada were all lower, but offset by gains from the EU, Russia and China. This is 34 million tonnes up on last season. With small cuts in consumption, world stocks moved up 1.2 million tonnes to 289.5 million tonnes – 12.65 million tonnes up on the year. The weight of these increased stocks is likely to prevent any notable wheat market rally without a significant new crop issue developing.
- Analysts forecast smaller 2020 EU crop
In its December report grain market analyst, Stratégie Grains highlighted the winter wheat drilling difficulties seen in France and the UK. It forecast a 3.5% drop for soft wheat production and a crop of 140.5 million tonnes. However, any positive market reaction is offset by the increased Russian winter wheat area that has been drilled.
- Lack of demand for unsold old crop malting barley
It has been a very quiet week in the malting barley market. Unsold old crop malting barley is struggling to find demand, with domestic maltsters appearing to be well covered. The crop 2020 market also remains inactive, as buyers sit and wait due to the prospects of a large 2020 malting barley crop.
- Impact of currency on exports remains unclear
It is hard not to mention the result of Thursday's General Election, which resulted in the significant firming of sterling against both the euro and dollar. Just how much this currency swing will impact the UK's competitiveness for both feed and malting barley exports remains to be seen. As a reminder, exports are crucial for the remainder of the season based on the large surplus of UK barley from harvest 2019.
- Large spring barley crop forecast
With the well-publicised issues that took place during autumn wheat sowing, everything is pointing towards another large spring barley crop for harvest 2020. Consequently, spring seed is likely to get tight. Once again, we have the ever-present uncertainty around Brexit and the impact of potentially exporting this surplus to Europe. As a result of this, there will be pressure on both new crop feed and malting barley values. It looks prudent to have a contract in place for harvest 2020 malting barley. Frontier is offering guaranteed minimum premium contracts, feed and malting barley pools and futures-related distilling contracts. Please speak to your local farm trader for available marketing options in your area.
- Strong Chinese demand
Our domestic OSR market managed modest gains early this week, largely fuelled by firmer global markets as China has stepped up its imports of oilseeds. The lifting of tariffs on US soybean exports to China was seen as a sign of progress on agricultural trade and Chinese demand looks robust, with soybean imports forecast to increase by 1.5 million tonnes to 87.7 million tonnes in 2019/20. This compares with 82.8 million tonnes last season. Further gains were tempered by news from Brazil of improving crop conditions and a forecast 2019/20 soybean crop of 121.09 million tonnes – compared to 115 million tonnes from last harvest.
- USDA report
The December USDA World Agricultural Supply and Demand Estimates released this week were neutral to oilseeds markets. The December report is well known for typically containing few surprises and most of the key figures were left unchanged from the previous month.
- Domestic markets
Liverpool-delivered crush prices settled back after the General Election result became clear and the value of sterling firmed. However, EU rape futures prices are sharply firmer at the time of writing and this has largely offset the effect of our firmer currency. Talk of a resolution to the trade dispute between the US and China appears to be behind today's firmness in physical markets.
- Sterling strength affects old crop bean values
Recent political events have strengthened sterling, leaving old crop bean values under pressure. Despite an active export period from September to December, we still need to export another 100,000 tonnes before the arrival of new crop.
- New crop values under pressure
With a larger planted area of spring beans planned for next year, we also expect new crop values to come under pressure. At current values, beans are still relatively expensive for compounders to use when compared with other mid-range proteins. As ever, the big unknown will be new crop quality. If we continue to see increased bruchid damage, we may well have less human consumption beans and more feed to trade.
- Nitrogen / Urea
Suppliers continue to watch the effect of the current weather conditions on demand. With eyes also on the exchange rates, the increased strength in sterling will present lower replacement values on most solid grades.
The application window will open in a matter of weeks and, with a large percentage of growers (understandably) yet to fully cover requirements alongside lower than normal residual soil nitrogen and sulphur levels reported, getting product onto crops is vital. Given the overall situation, it comes as no great surprise that the pressure on timely product supply and logistics will be cause for concern for UK suppliers if buying decisions are not made soon. Speak to your Frontier contact to get an update on deliveries and availability in your region.
- P and K
Following the overnight news, exchange rates have improved. However, most of this effect was already factored in and the market remains a 'buyers' market', as suppliers still want to move stock to enable space at ports for other imported fertiliser commitments.
Discuss options and new products available with your Frontier contact to stay ahead of upcoming demand.
Alongside its divisions, SOYL and Kings, Frontier is hosting a series of 17 winter training events. Open to all farmers interested in learning more about the use of digital technology to improve crop production performance, the events will include valuable insight into MyFarm and its role as a complete farm management platform.
You can find your local event and book your place by visiting our website.