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- Wheat prices lower
World wheat prices have fallen again this week, which was highlighted by London wheat futures. This extended losses to the lowest level since the middle of last October. Paris wheat futures have led the way down with increasing concerns that the EU export pace is falling behind where it needs to be to meet export estimates. Brussels updated its weekly EU wheat export data, which included French data that was previously lacking. Shipments to 9th January 2022 rose to 15.1 million tonnes, up by 1.1 million tonnes on the week. However, this is less than half the surplus gone with less than half the season left to clear the surplus wheat. Shipments last season at the same time were 14.8 million tonnes from a total available surplus of 27.5 million tonnes. Analyst, Strategie Grains cut its EU wheat export estimate by 300,000 down to 31.2 million tonnes. This was due to strong competition from Argentina and the Black Sea opposing the traditional EU market. It was thought French wheat might be excluded from an Algerian wheat tender held this week.
FranceAgriMer cut its French wheat export expectations and estimated that the French wheat stocks will rise to a 17-year high, adding to the negative market sentiment.
- Bearish USDA and WASDE reports
This week the United States Department of Agriculture (USDA) produced some mildly bearish data with its updated World Agricultural Supply and Demand Estimates report (WASDE). In addition, it published its estimates for the US winter wheat acreage for the 2022 harvest. The USDA increased its world wheat production estimate by 700,000 tonnes to a total of 778.6 million tonnes. It also predicts that world stocks will increase by 1.7 million tonnes to a total of 279.95 million tonnes, although this is still 11 million tonnes down on the year. The US winter wheat area is seen up to 34.4 million acres, which is 750,000 acres ahead of its previous estimate and 200,000 ahead of average trader expectations. However, recent updates from the USDA show that the winter wheat in primary producing states, Kansas and Oklahoma, is in particularly poor condition. Therefore, what benefit the increased planted area proves to bring is questionable. The International Grain Council also updated its world supply and demand balance sheets. It noted a larger increase in world production to 781 million tonnes. This is due to increases for Argentina, which is up 2.2 million tonnes to a total of 22.1 million tonnes. Additionally, Australia is up 3.5 million tonnes to a total of 35.5 million tonnes. These estimates are considered closer to private estimates, rather than the USDA estimates. The private estimated figures are 20.5 million tonnes for Argentina, which is up just 500,000 tonnes. Australia has a figure of 34 million tonnes, which is unchanged on last month.
- South America corn crop damage
There were some bullish production estimates from South America this week, where heat and drought has caused some irreversible damage to young corn crops. On Wednesday, the USDA reflected on these adverse weather conditions and made cuts for Brazil, which they placed down 3 million tonnes to a total of 115 million tonnes and Argentina, down 500,000 tonnes to a total of 54 million tonnes. Overall, the USDA cut world production by 1.7 million tonnes with the South America losses offset partly by gains for Ukraine, which is up two million tonnes to a total of 42 million tonnes, and the US, which is up 1.3 million tonnes to a total of 384 million tonnes.
World end stocks are gauged as 2.5 million tonnes lower than previously at the total of 303 million tonnes. However, the Rosario Grain Exchange sees significant crop damage because of 45 degrees temperatures and little to no rain for a month in some areas of Argentina. As a result, it cut its corn crop estimate to 48 million tonnes from its previous estimate of 56 million tonnes. Argentina is the world's second largest corn exporter but despite these production losses, corn futures fell on the back of forecasted heavy rain which is expected to benefit the suffering crops.
- Old crop feed barley demands
Old crop feed barley values were once again under pressure on the week, although losses were limited considering those seen in global wheat markets. Demand for old crop feed barley remains sufficient to support the volume of grain being sold ex farm. With premiums at circa £80-£90/t for malting barley depending on location, farmers remain focused on securing as much of this premium as possible where stocks left on farm are suitable for spring barley. Demand for old crop malting barley remains strong, particularly in the south and East Anglia. As a result, feed barley is trading at parity with wheat in the south west and circa £3/£5 discount in East Anglia. Discounts to wheat in the north and north west are wider but with road logistics still difficult, supplying these markets with volume remains a challenge.
- New crop 2022
New crop conversations remain limited at this stage of the season, although compounders are considering making a start to crop 2022 purchasing buoyed by the recent drop in wheat futures. New crop feed barley values are at a significant discount to old crop today, so the carry into crop 2022 should be minimised. This is a similar situation to what we saw last summer. With the drop in feed values again this week, malting premiums for new crop are still high at circa £65-£70/t, depending on location.
- Nearby prices easing
Domestic old crop rapeseed prices have eased a little this week with the key Liverpool crush market currently trading £25/t below the levels at the opening on Monday. Prices are still around £65/t higher than at the start of last month when sterling was almost 3% lower against the euro. The recent firmness in sterling, looked at in isolation, has made imported seed into the UK cheaper by almost £20/t over this same period. The bumper Australian crop is helping to fill the hole in European supply left by Canada. Imports are also seen from some unusual sources, including from the record crops seen in Paraguay and Uruguay. However, the trade flows out of Ukraine - a traditional supplier of rapeseed - into Europe are not as expected. In the first half of this marketing year, its overall volume of shipments was up 11% but 11% down into Europe, with sales to Bangladesh, Pakistan and U.A.E. all sharply higher.
- Crops shrinking in South America
New crop rapeseed prices have been more resilient, with only a £10 decrease this week. The shortage of rapeseed in the world this season has been well discussed and understood but for most producers it is more important to understand the dynamics of the 2022/23 marketing season. At this early stage, the various oilseeds within the global complex are showing more signs of moving in unison. Dry weather in South America is causing growing concerns over potential soybean production numbers, which is putting more pressure on the US to continue to export in volume. The knock-on implication of this is that the market will need a significant expansion in US soybean acres this spring and the only way to achieve this is for prices to stay high.
- Soybean stocks contract in USDA report
Wednesday's USDA report detailed its view on the world's agricultural commodities supply and demand positions, and put some numbers on the current situation. The standout news was on South American bean production, with the USDA cutting crop numbers from its December report in Brazil, Argentina and Paraguay by a record 9.5 million tonnes. At a stroke, this transformed the predicted stock build of two million tonnes for this year contained in December's report into a stock contraction of 4.5 million tonnes. This is a huge swing and traders believe that the situation in South America is likely to get worse. The only crumb of comfort in the report for the world's rapeseed crushers came in the form of Australian production, which was pegged at 5.5 million tonnes. Although this figure is still 1-1.5 million tonnes less than most trade estimates.
CF Fertilisers issued new pricing terms for AN early this week. They were at a lower level than the market expected to see and following the announcement the importers reacted and remained competitive. It is thought that these offers are likely to be short-lived depending on demand. There's also been a slight softening of global urea prices but physical stock for domestic use is still in tight supply, with very few new cargoes arriving if any at all.
The gas market remains volatile but has levelled out slightly since the peak in December 2021. Prices in January 2022 are ranging between £1.70 to £2.40 per therm, with today's value at £2.22 per therm at time of writing. Today's gas price is still higher than the level we saw when fertiliser plants were switched off for production last year and nitrogen supply in the UK market will continue to remain tight.
There was limited trading this week for UAN as the market has awaited some direction. Demand is expected to increase once we get into the usage period and when a true picture emerges of how winter crops look heading into the early part of the spring.
Shippers and distributors of UAN remain cautious in the short term about committing to any new UK landed volumes without the full extent of any remaining market clarity.
We have seen a rise in MOP/TSP/DAP prices in the UK post-Christmas but demand still remains slow at these high prices. Product supply and logistics will continue to be a challenge so the advice remains to cover your fertiliser requirements to have product on farm in time for the usage period.
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