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- USDA rallies markets
World wheat markets rallied this week following the publication of the November World Agricultural Supply and Demand Estimates (WASDE) report from the United States Department of Agriculture (USDA) on Tuesday afternoon. There were few changes to the world wheat estimates from last month's report.
Russian production increased by half a million tonnes to 83.5 million tonnes, the Argentinian estimate was cut by one million tonnes to 18 million tonnes and, surprisingly, the estimate did not change at all for Australia, remaining at 28.5 million tonnes, despite estimates from private analysts being as high as 32 million tonnes.
Overall the world production estimate for wheat has dropped by 700,000 tonnes to a new total of 772.38 million tonnes. Stocks are down one million tonnes to a new total of 320.45 million tonnes. The wheat estimates alone would have had minimal market impact, but futures markets have also sharply increased as a result of major revisions for the world's corn and soybean balance sheets.
World corn production has had a notable cut on last month of 14.19 million tonnes, down to a new total of 1.1446 billion tonnes. This is due to two changes. The first is smaller US corn yields, which were cut from 178.4 to 175.8 bushels per acre, decreasing the US crop by 5.56 million tonnes to a new total of 368.49 million tonnes. Secondly, Ukrainian corn production is down from 36.5 million tonnes to 28.5 million tonnes. Production is also lower for the EU; down by 1.9 million tonnes, bringing the new total to 64.2 million tonnes. Meanwhile, Russian production is down by one million tonnes to a new total of 14 million tonnes.
The USDA has also reflected on the current strong corn buying pace from China, which has increased its use this season by six million tonnes, consequently increasing imports from seven to 13 million tonnes.
The net result is world year-ending stocks now nine million tonnes lower than the previous report at 291.43 million tonnes with 191.51 million tonnes of that total sat in China. World corn stocks will now be 12 million tonnes down on the year, as long as South American crops meet expectations. The USDA balance sheet sees Brazil producing a record corn crop of 110 million tonnes, which would be eight million tonnes up on the previous year.
The changes for the world corn balance sheet since the first 2020/21 USDA estimates back in May are huge. In the May report, the USDA estimated world corn production would reach 1.186 billion tonnes and stocks would be up to 339.62 million tonnes. With world stocks now estimated to be almost 50 million tonnes lower, US Chicago Board of Trade (CBOT) corn futures prices have appreciated by over 40%.
- Argentina wheat crop lower again
Argentina is now set for its smallest wheat crop in five years according to the Rosario grains exchange, as the impact of prolonged drought conditions become more apparent. The country's crop is down to 16.7 million tonnes, which compares to the USDA's estimate on Tuesday of 18 million tonnes. However, across the country there are mixed fortunes with production. The province of Córdoba has particularly suffered and is likely to produce its worst wheat harvest for 20 years. Conversely, the main wheat province, Buenos Aires, escaped the drought conditions and may produce record yields. Overall, it is thought up to 600,000 hectares of the 6.5 million hectares drilled to wheat could be a total loss. The Buenos Aires Grain Exchange put the wheat harvest at 15.5% complete. However, recent rain is encouraging for corn crops which are progressing though the drilling cycle.
- EU balance sheet tighter
French analyst Stratégie Grains published its November EU wheat and corn balance sheets, highlighting a tightening supply picture. It cut wheat production by 300,000 tonnes, down to 129.2 million tonnes, and corn by 400,000 tonnes, down to 62.3 million tonnes. The EU has a significant corn import need and this is made harder by the reduced availability and higher prices in Ukraine.
Stratégie Grains cut EU domestic corn use but increased wheat, which reduces wheat export availability down to 24.3 million tonnes from 25 million tonnes and year-end stocks to 9.9 million tonnes from 10.5 million tonnes. Stocks will be 2.8 million tonnes down on the year.
It also predicted a 9% increase for the 2021 EU wheat area, bringing the new total to 24 million hectares with improved planting conditions this autumn compared to last year. French farmers are progressing well. As of the 9th November, FranceAgriMer had reported that 88% of winter wheat had been drilled, up 12 points on the week and well ahead of the completion rate at this time last year, which was only 70%.
- Saudi Arabia announces sizeable tender
UK barley is competitive to the EU and North Africa but time is running out for the UK to export to the EU with Brexit on the horizon. This week's global headline was Saudi Arabia announcing a tender for 720,000 tonnes of barley for February-to-March arrival. Traditionally a market that EU and Black Sea destinations trade into, this tender is expected to be executed from Black Sea and Australian origins. With the Australians unable to trade into China and a large barley harvest just beginning, finding alternative markets such as Saudi Arabia will be crucial given that Australian surplus will outweigh demand from more local markets in south-east Asia.
- UK exports significantly down
By the end of September, the UK had exported 272,000 tonnes according to trade data from the Agriculture and Horticulture Development Board (AHDB). This is considerably less than last year despite having another significant exportable surplus. There are several factors likely to have contributed to this. Firstly, the UK had a smaller winter barley crop this year than last year, with much of the spring barley crop still in the field at the start of September throughout the UK. Secondly, with Spain producing a far greater barley crop this year, the UK has lost an export destination that often represents the single largest export home for UK barley. To highlight this, last year between July and September the UK exported 290,000 tonnes of barley to Spain, but this year, exports were almost non-existent over the same period.
- Malting barley usage down
It has now been just over a week since England began a second lockdown to tackle the spread of Covid-19, creating uncertainty for all sectors of the UK economy. The hospitality sector is a key part of the UK economy, which was leant some support from the Government's 'eat out to help out' scheme in August after around three months of closure. However, the AHDB released data late last week stating September malting barley usage was down 11.5% compared to last year, with footfall falling across the month. With pubs and restaurants now closed for the rest of this month and uncertainty over the restrictions on social gatherings through to the festive period, the demand outlook for malting barley remains uncertain.
- USDA report releases lowered estimates
The report on Tuesday (USDA/WASDE) lowered US soybean yield estimates from 51.9bu/a to 50.70bu/a. US ending stocks dipped below 200 million bushels.
Global ending stocks were also reduced down from 93.75 million tonnes to 88.70 million tonnes. While this move in stock was expected, it still gave a boost to Chicago bean markets and, in turn, other oilseed markets, with Matif rapeseed futures adding €10/t at one point.
- South American crops become essential to global stocks
South American crops, which are currently being planted, have become important in refreshing global stocks, but imperfect weather conditions will make this difficult to achieve. Over the next month, much will depend on South America and the weather it receives. The latest USDA report predicted production of 51 million tonnes, which is down from 53.50 million tonnes last month. However, the estimates remain unchanged for Brazil at 133 million tonnes.
- Strong demand for oil and meal
Support in the oilseed sector continues to be led by demand. Requirement for the raw material for both oil and meal is strong, particularly in China where a strong rebound in pig herds following the devastation created by swine flu has rapidly picked up the pace.
- Weakening prices for UK beans
Pulse markets have suffered somewhat this week due to a lack of buyers wanting to lift their cargoes, causing the closure of more November export contracts. This has increased the volume of UK beans on the market and, with very little demand domestically, prices are likely to weaken further.
Demand for human consumption beans has also fallen away due to the weakening of the US dollar after the election, as well as news of the first bulk vessel of beans due to be loaded in Australia next week.
- Frontier new crop bean buyback offers a chance to lock in value
The Frontier new crop bean buyback at £30/t over November 2021 wheat futures is a great place to start locking in value for growers who have already planted their winter bean seed.
Since last week's report, there has been a large rise in farmers ordering product for the coming season, resulting in supplier stocks being reduced with new values coming through. CF Fertilisers, which reset values in October, has increased straight nitrogen by £5/t and its nitrogen sulphur grades have increased by up to £8/t. Supplies of both domestic nitrogen and imports remain tight and further increases are expected over the next week. Some suppliers only have delivery slots available for February.
Urea values have firmed this week on tighter supplies and renewed interest from other destinations, with replacement values into the UK around £260/t.
Farmer ordering has been moving at a pace for winter and January delivery. Potash markets remain flat; however, phosphates have increased by £10/t this week. Going forward, a further increase in phosphates is expected; especially diammonium phosphate (DAP) pre-Christmas. Growers who have chosen to take cover on all grades this autumn have made a wise decision. With large volumes still to be purchased, it is advisable to get stocks into sheds on time to avoid the possibility of poor supplies and no delivery.
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