- World wheat prices move higher
A number of factors have helped send world wheat prices higher this week. Increasing optimism over the improving US/China trade situation provided an initial tonic as US weekly export sales hit a season high of 754,000 tonnes.The fast pace of Russian wheat exports is also making an impact with supplies proving harder and more expensive to secure. Egypt bought 120,000 tonnes of Russian wheat this week, paying US$6 per tonne more than they paid in last week's tender and the highest price they have paid for imported wheat for almost four years. It is worth noting that the Russian Agriculture Ministry will get together with traders in what is described as a 'routine' meeting today. Similar such meetings earlier in the season attracted significant interest over fears that exports restrictions could be imposed.
- Argentina wheat crop fears
The Buenos Aires Grain Exchange trimmed their 2018/19 wheat crop estimate by 200,000 tonnes following frosts and hail damage.Their harvest is in line with the average at 57% completed but heavy rain and consequential flooding is forecast for this weekend, raising concerns for yields and quality. Some private estimates have the crop at 18 million tonnes and a loss of quality could have a significant impact on trade flows as world milling wheat supplies tighten.
- Foreign exchange adds value to UK wheat
With world wheat markets buoyant, the latest Brexit chaos triggered another sterling selloff which helped our domestic wheat prices move higher. London wheat futures for May 2019 touched £179.35 yesterday which is more than £8 per tonne above the mid-November lows. With the Defra balance sheet indicating a surplus of 800,000 tonnes and UK prices not export competitive, this provides a good selling opportunity.
- Analyst upbeat on European wheat crop prospects for 2019-20
In its latest report published this week, analyst Strategie Grain highlighted a big year-on-year jump for EU wheat production. Having initially been concerned about early autumn dryness affecting much of Northern Europe, it notes that timely rains since late October have proved very beneficial. The drilled area is seen almost 6% higher and yields almost 10% higher which will, if realised, result in the EU-28 crop moving up over 20 million tonnes to 147 million tonnes.
- Minimal changes from the USDA
The USDA December report published this week showed minimal changes in their world wheat balance sheet and no market impact. However, for the record, small revisions for Canada and Australia had world wheat production down just 100,000 tonnes on their November report at 733.41 million tonnes and end year stocks at 268.1 million tonnes up 1.4 million tonnes. This is 24 million tonnes below last year.
- Quiet malting market
It has been an uneventful week in the malting barley market, with little fresh business. Nominal export values have slumped this week despite a lack of trades but the execution of existing export malting barley contracts continue at a good pace.
- Malting barley looks strong over feed
Domestic malting barley prices remain firm and show strong premiums over feed barley. Propino is commanding a premium over Planet, as many parcels of Propino fail to meet the Max 1.85N requirement.
- Quality control
At this time of year it is imperative that malting barley in long term stores are being monitored to make sure that germination does not deteriorate. Please speak to your Farm Trader about testing samples.
- Trading politics – this week has been all about sterling
Rapeseed markets have been volatile, with political crosswinds heavily influencing price movements. Sterling has been incredibly volatile through the week as markets reacted to the uncertainty around the Brexit vote which led to a firming of UK ex farm prices as sterling lost 1.5%. As well as this, the challenge to Prime Minister Theresa May's leadership and the continued negotiation with the EU saw sterling bounce off the lows, only to eventually regain all the losses seen earlier in the week.
- Global news
The canola harvest in Australia is almost complete and cargoes for delivery in the first six months of 2019 into the Northern European crushers have been traded.
Political events across the pond continue to shape the soybean market and this week we saw trade from the US to China resume. The rumour is that 1.5 million tonnes (although this could well be higher) of soybeans were traded and, if Donald Trump and Xi Jinping continue to look for a way forward, this uptrend in soybean exports from the US could develop further. One thing is for sure, China needs US soybeans and US farmers need China.
On Tuesday (11th December) the USDA issued a monthly supply and demand report. There were no real changes apart from a slight increase in soybean production for Brazil (18 and 19 crop). Going forward from here the trade will focus on South American weather, the development of the South American soybean crop and US/China trade. To date, the US is going to end this season with record stocks so the market either needs China to purchase a huge amount of US soybeans or for weather to drastically cut production in Brazil. Today, both seem unlikely so heavy stocks will dictate price direction.
- Little activity for old crop bean markets
With feed demand limited by high prices and human consumption stocks on farm largely moved or traded to take advantage of the buoyant export trade, old crop bean markets have been quiet this week.
- Usual spring yields predicted
New crop markets are likely to trade at better premiums to wheat futures than in recent seasons, as winter bean plantings have been limited by seed availability and there will be competition for spring acres from other crops. Spring yields are likely to return to more normal levels - this could give us a larger bean crop to trade from harvest 2019 but demand is expected to remain strong.
The urea market is slightly weaker this week. Globally, the market dipped down by $30-$40/t, however, the drop in the UK is only small due to current exchange rates between sterling and the US dollar. This dip in the market is enough to attract large buyers but looks to be temporary, as prices are expected to move back up to old levels in the first quarter of 2019.
UK (CF Fertilisers) AN and NS products are still only offered for February delivery. Production issues at both UK plants over the past 12 weeks have caused a backlog on deliveries, meaning it now looks likely that supply won't catch up until mid February.
UK NS grades will be extremely tight for spring and alternative imported products will be a premium again due to current exchange rates between sterling and the dollar. As a result, we strongly recommend you discuss your NS requirements with your Frontier contact before Christmas.
The main upward driver in these markets is the cost of replacement raw materials, again down to exchange rates. TSP is purchased in US dollars and MOP in euros.
If the exchange rates stay at current levels (£1.00 = $1.26/€1.11) an increase in prices, including PK blends, will happen and very soon.
Again, please talk about your requirements whilst stock is available ahead of the predicted increase.
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