- Coronavirus pushes wheat prices lower
The impact of coronavirus on global economies has been the overwhelming factor driving wheat prices this week. The widespread panic-selling seen in stocks and shares and crude oil spilled into all commodities, pushing world wheat prices down. US wheat futures fell to lows not seen since last September and their losses since mid-January rose to 15%. However, the impact of this on UK wheat futures was reduced as sterling lost ground to the euro following the Bank of England base rate cut of 0.5%.
The UK wheat market is also supported by the likely shortfall in availability next season due to the small crop expected. However, general disruption to the economy is likely to lead to cuts in demand and leave buyers sat on the sidelines. Regardless of any positive fundamental market features, the overall negative market sentiment as a result of the coronavirus looks set to continue for the short-medium term.
- Another uneventful report from the USDA
On Tuesday, the United States Department of Agriculture (USDA) published its March updated estimates for world supply and demand without much attention. However, several minor adjustments were made. For example, Australian wheat production was cut by 400,000 tonnes, bringing its total to 15.2 million tonnes. This was offset by an increase of 500,000 tonnes in Argentina, bringing its total wheat production to 19.5 million tonnes. In total, the USDA estimated an overall increase in world production of 440,000 tonnes, reaching a total of 764.49 million tonnes. Additionally, a 740,000 tonne increase in expected consumption reduced the year-end stock by 870,000 tonnes to 287.14 million tonnes.
- Analyst makes further cuts to 2020/21 EU wheat availability
The adverse wheat drilling conditions and subsequent continuous rainfall affecting much of the western side of Europe has led analysis bureau Stratégie Grains to make further cuts to 2020 EU wheat production. Cuts have been made to the primary European wheat producers: UK, France and Germany. Stratégie Grains now estimate overall EU 2020 production will be 1.9 million tonnes lower than last month at a total of 136.7 million tonnes. This is almost ten million tonnes down on last year. The poor state of the French wheat crop was highlighted by the latest FranceAgriMer crop rating which slipped one point on the week to 63%. This is good to excellent compared to a crop rating of 85% last year and 88% on average.
- UK barley exports continue
UK trade data released this week confirmed the UK had exported 1.3 million tonnes of barley by the end of January. The rate of exports has slowed recently but exports still continue from a range of ports, mainly in the south. New business is difficult to find as old crop third-country business was done at below UK levels. Opportunities to sell coasters into southern Europe for collection in the nearby position do exist but are few and far between. The recent tender to Tunisia for July/August delivery was purchased at prices that equated to new crop barley from the Black Sea region and sit well below current UK harvest values.
- UK malting barley market in the doldrums
With end users well covered for the year, the domestic market revolves around a few trade shorts. With small premiums, the market remains difficult as parcels will not travel great distances. Export sellers in the UK are lining up to chase what business does appear, but sellers outnumber buyers at present.
- New crop barley plantings stall
Planting figures received from France show a modest 1% increase in drilled area this week. These figures show just 34% of the intended spring barley area is in the ground at this time in comparison to the 96% planted this time last year. It is not just the UK that is impacted by the current wet conditions. The situation has not caused significant problems as yet, but market watchers will be keeping a close eye on the situation over the next couple of weeks.
- Crude oil leads markets lower
It has been a dramatic week for global oil markets with Monday's trading dominated by the fallout from the recent crude oil price war between Russia and Saudi Arabia. Markets have recently been coping with the economic impact from the developing coronavirus situation. The last thing needed was a fight between these two global oil supply heavyweights. Crude oil prices dropped lower at the start of the week and are now less than half of the levels seen this time last year. This has a direct impact on the demand for biodiesel, with producers in this sector being seen as prominent sellers in recent days.
- Global oilseeds stocks tight
Although prospects for the Australian canola crop have improved recently following beneficial rains in eastern Australia, there are a few bullish stories starting to emerge in world markets. Recent talk of record South American soybean yields has been scaled back following recent hot, dry weather in Brazil and Argentina. Chinese demand is strong with current estimates projecting a 7% increase in soybean imports in 2019/20. Palm oil stocks are also worth watching. They are projected to fall by 1.5 million tonnes by the end of the season, with a further draw down in stocks expected during 2020/21.
- Longer term optimism
The market is very difficult to read in the short-term. World events in financial markets are currently leading the way and there is a 'risk off' atmosphere in all markets at the moment. However, looking forward, the fundamentals of the vegetable oil market remain supportive.
- Old crop bean sales have reached a plateau
The old crop bean market finally looks to have peaked with no new buying interest at current levels. Any shipper shorts are now mostly covered and demand in Egypt for human consumption beans has waned as there are plenty of new crop Australian beans in the market. However, it is still a long way from the arrival of any new crop beans with Baltic and UK crops still not planted and the high demand foreseen in Egypt during Ramadan. The market is expected to remain flat over the next two weeks with the next price moves being driven by the availability of any further supplies of UK beans.
It has been a volatile week in global financial markets and for world health. Urea markets remained firm despite the drop in oil prices. Internationally, urea supply for April is tight, with India shortly due to tender for approximately one million tonnes. This tonnage will not come from China, considering they are now importing product due to domestic restrictions.
Spreaders are out and running in many parts of the UK, bringing fresh demand for immediate deliveries and adding pressure to the logistics system.
Over the next few weeks, the UK could see conditions that delay fertiliser deliveries. Growers are advised to cover known requirements urgently.
- P and K
Prices for straights including DAP/TSP/MOP and blends of P and K are still competitive compared to previous years. Given the weaker rate of sterling, replacement costs are higher and likely to rise very soon.
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