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- Wheat markets continue to fall
Speculative selling on wheat futures markets continued this week and saw values from the Chicago Board of Trade (CBOT) drop to a six-week low. The increasing size of the Russian wheat crop seemed sufficient to encourage sellers, as analysts published new estimates surpassing 80 million tonnes. Average yields are running above last year and, with a larger wheat area drilled, it seems likely that Russia will produce its second largest wheat crop on record. However, there is still time for the average yield to fall as some of the worst drought-affected spring wheat areas are yet to be combined.
- USDA trims world wheat production
On Wednesday this week, the United States Department of Agriculture (USDA) published its August World Agricultural Supply and Demand Estimates report. Production estimates for the EU were cut by four million tonnes from the last report, with Argentina down 0.5 million tonnes and Kazakhstan down one million tonnes. These losses have outweighed the small increases that were seen for the US and Ukraine as well as the 1.5 million tonne increase for Russia. World production estimates are now three million tonnes lower than in the previous report, at a total of 766 million tonnes - just two million tonnes up on last year.
The USDA increased Russian output estimates to 78 million tonnes which is two to three million tonnes behind estimates from other analysts this week. Elsewhere, multiyear adjustments to EU data led to an increase in world stocks of two million tonnes, bringing the total to 316.79 million tonnes. This is 16 million tonnes up on last year. However, it's worth noting that if China and India, who are not traditional exporters, are excluded from these figures, the end of season totals will be two million tonnes lower.
- US corn up eight million tonnes after surviving storms
In its corn balance sheets, the USDA increased its US yield estimate to 181.8bu/ac in line with the improving weekly crop ratings. This compares with its estimate of 178.5bu/ac in the last report and 167.4bu/ac last year. This will add seven million tonnes to the US total corn production estimate which now stands at 388.08 million tonnes - over 42 million tonnes higher than last year.
However, the USDA has not taken account of the catastrophic storms that hit much of the US corn belt at the beginning of the week, flattening corn crops and severely damaging grain-handling facilities. One private analyst estimated crop losses could amount to between five and ten million tonnes, and trader eyes will be watching the latest crop condition report which is due to be published next Monday to see if this signals these losses.
- EU wheat crop continues to shrink yet prices fall
Analyst Stratégie Grains published its latest EU-28 supply and demand estimates and made further cuts to production predictions. Further yield losses seen in the UK, France, Germany and Finland outweighed gains in Spain and the Baltic states, reducing total EU-28 soft wheat output to 128 million tonnes. This is almost 19 million tonnes lower than last year. It therefore seems extraordinary that French wheat futures fell this week to levels not seen since the middle of March. This is partly due to a poor start to the export campaign. The EU-28 exportable surplus is now 12 million tonnes lower than last year at 23 million tonnes. However, during the first five weeks of the season, less than one million tonnes of this surplus has been shipped. This leaves a requirement to ship two million tonnes a month in order to meet export targets.
- Feed barley export pace slow
The feed barley exports pace from the UK remains fairly slow, with buyers focused on late August and September vessels with no forward interest. Today, demand remains limited to Holland and Ireland. Third country demand is not currently in the UK's favour as more competitive offers of feed barley are available from Black Sea origins. These regions are seeing continually improving yield estimates.
- Spring barley performing well at harvest
The spring barley harvest is slowly progressing in the UK, but the spread in drilling dates is leading to a long and extended barley harvest in England this year. Most wheat crops are being prepared for harvest before the planting of spring barley, so growers are cutting wheat and leaving the spring barley a little longer.
Yields on spring barley are generally higher than pre-harvest expectations in most areas. The south of England is performing especially well with spring barley yields of 8.5t/ha being reported in some areas. Even in East Anglia, many crops are performing over 6.5t/ha. Better-than-expected yields are pushing total UK barley crop estimates to over 7.5 million tonnes.
- An excess of malting barley
Malting quality along the south coast of England looks to be generally good. East Anglian spring barley nitrogen levels are trending high; however, many crops were grown for feed, with yields pushed by extra nitrogen applications. The area which has suffered the worst impact to date looks to be the north of Norfolk, where the drought seems to have impacted yields and subsequently nitrogen contents. It is important to keep in mind that, if the malting barley pass rate is only 30%, the UK will have more malting barley than can be used domestically or exported before the end of December due to falling domestic demand and a sizable UK spring barley crop.
Spring barley harvest progress in Lincolnshire, Yorkshire and the Midlands remains slow but hopefully progress can be made in the next week, weather permitting. The Scottish spring barley harvest is also underway with limited amounts being cut. The first samples have looked encouraging with low nitrogen and screenings.
In mainland Europe, Danish malting barley crops are performing well with good yields and quality. Nitrogen levels are generally a good mid-range; just what the market requires. The Danish Cooperative has entered the market as a seller in the last few days, encouraged by harvest results.
- Stable markets
Domestic rapeseed prices remain unchanged since the start of last month. Despite plenty of activity in the rapeseed market, the markets themselves have remained remarkably stable as the European harvest progresses almost to completion.
The standout development for the rapeseed market in recent days has been the confirmation of an ever-shrinking Ukrainian crop. This origin is key to keeping domestic crushers going in the period before Southern Hemisphere supplies become available in early 2021.
Furthermore, World Oil dropped its production estimate for Ukraine this week to 2.5 to 2.6 million tonnes, which compares to a pre-harvest estimate of 3.2 million tonnes. This drop of up to 800,000 tonnes will come directly off the volume available to export to Europe, raising the prospect of tight markets over the next few months.
- Aggressive Chinese buying
It is likely that some of the demand for rapeseed products will end up getting filled by crushing more relatively cheap soybeans. However, soybean markets are seeing a marked increase in demand, largely fuelled by aggressive Chinese buying. US bean crop ratings are at historically high levels, with 74% of the area rated 'good' or 'excellent', but substantial sales of US beans are being recorded on a daily basis.
On Wednesday this week, for example, China placed orders for 15 US cargoes. In July, it imported over ten million tonnes of beans, which represents an increase of 16% over July 2019. Processing figures are also running ahead but increasing at a slower rate, which implies that the Chinese government is embarked on a stock-building exercise.
- Poor quality beans at early harvest
Early harvested beans are still showing poor yields and poor quality due to drought stress during the growing season. The beans are generally very small and displaying high levels of bruchid damage. In general, they are unsuitable for human consumption. Regardless, any premiums for human consumption are hard to find as Egypt is able to buy at much cheaper rates from Australia due to the prospects of a much larger crop in the country.
There will be a small window of opportunity before the Australian harvest for UK northern spring beans, which are expected to be higher yielding and better quality.
- Short supply of winter bean seed
With an expected increase in demand for winter bean seed this year, supplies are already running short. Growers thinking of using home-saved seed should get samples checked for germination, ascochyta and nematodes. Further details of these tests are available from the Processors & Growers Research Organisation (PGRO).
In a week that has seen harvest progress at a quick pace across the UK, the domestic fertiliser market has remained relatively quiet. Urea has traded firm on the back of offers into India and this has been reflected in the UK market, although volumes traded remain low.
CF Fertilisers announced that it will issue new terms early next week and the consensus is that pricing will move higher. Other suppliers may follow.
Liquid urea ammonium nitrate (UAN) offers remain open for autumn and spring fill business. Pricing remains competitive and it is advisable to take cover at these values whilst they are still available.
Oilseed rape establishment and the likelihood of a two-million-hectare wheat crop for 2021 will drive farmers to increase their pace on purchasing phosphates and potash grades into the autumn. Suppliers are indicating that availability for phosphates in particular could become tight due to the possibility of duties being placed on materials from Russia and North Africa into the North American market. This could result in a rush on delivering supplies to this region before duty implementation.
Potash markets remain relatively flat with plenty of product available. Please keep in mind the phosphate and potash offtakes from this year's harvest and the importance of keeping indices at good levels for future crops.
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