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This week world markets dropped lower, ending last week's strong run of prices in US wheat futures.
Chicago Board of Trade (CBOT) has lost almost half the gains it made after China purchased 1.1 million tonnes of US wheat, meanwhile Black Sea origins reinforced dominance in world trade.
Algeria is thought to have bought over 900,000 tonnes of wheat, with Tunisia and Bangladesh also making purchases. In addition, Saudi Arabia announced a tender for 700,000 tonnes. Russia and Ukraine seem likely to supply the majority, although France and Bulgaria could pick up some of the trade.
The United States Department of Agriculture (USDA) published its December World Agriculture Supply and Demand Estimates (WASDE) report late last Friday and as expected, it did little to encourage the bulls.
World wheat production is seen one million tonnes higher than last month, with Australia up one million tonnes to a total of 25.5 million tonnes and Canada up 950,000 to 31.95 million tonnes -matching recent official adjustments.
Brazil offset these gains by decreasing one million tonnes because of lower-than-expected yields. World wheat consumption is seen rising by 1.8 million tonnes, leaving a modest cut of 49,000 tonnes in world stocks to a total of 258.2 million tonnes - down 11.65 million tonnes on the year.
The world maize balance sheet more than makes up for the declines in wheat, with an increase on the year for world corn stocks of over 15 million tonnes. Changes over the month on the corn balance sheet were limited but whilst the USDA was happy to change its estimate for Brazilian wheat production, they again ignored official Brazilian corn production data from the Brazilian National Supply Company, Conab, which now put production just below 219 million tonnes. The USDA remain stubbornly at estimates of 129 million tonnes, over-inflating world supply.
Subsequently, the Chinese Ministry of Agriculture have said the country's 2023 corn crop will be a record 288.8 million tonnes, following initiatives to expand the cropped area. The USDA sit at 277 million tonnes.
UK wheat futures gains and losses have been limited on small trading volumes.
Last week, US CBOT futures completed eight consecutive higher closes – something that hasn't been seen for several years and ended with a 15% price gain. For the London futures market, the gain was little more than £5/t and most of that has been lost again this week.
The limited price movement and lack of trading interest is for several reasons, but the current weather pattern has a large part to play. The return of persistent heavy rain across much of the UK has again resulted in waterlogged fields and is likely to have brought an end to winter wheat drilling.
Estimates suggest the UK wheat area could be 15-20% lower than the previous year and this could result in a shortfall that's unlikely to meet 2024-25 domestic wheat needs. Part of the demand could be met by the market funding a substantial carryover of 2023 crop. Helping to facilitate this is the premium for old crop to new crop futures prices, which has topped £12/t.
Ordinarily, the weight of a UK wheat surplus would push prices lower to secure export sales, but current physical prices are about £10/t too high to compete. The carryover prospect prevent prices falling that far, but challenging demand in domestic ethanol and compounding production leaves domestic buyers scarce and UK prices reluctant to move much higher as a result.
The official UK 2023 wheat production estimate is now confirmed at 13.98 million tonnes but with no exports the carry out could be at least double commercial needs.
The grind to lower prices continues due to lack of export interest from our traditional buyers and competitive offers of supplies from the Baltic and Black Sea zones.
English growers have supplied the market in good volume in the early part of this week into the domestic market, as the old crop feed barley story is one of a more bearish nature when compared to other commodities.
We are seeing some signs of top up tonnage wanted into various UK feed mills in December. The interminable wet weather is driving some fresh buying interest from the ruminant sector.
There has been some fresh interest from English maltsters this week for the post-Christmas period, which is a positive for the crop '23 malting premium which could remain high for a while longer.
We have not seen any export trade but there does seem to be underlying buying interest for English malting barley due to our price being €5/t less than offers from Scandinavia. Any emerging buyer is also likely to get better quality spring barley from English origin instead of the poorer quality spring barley in the Baltic states'.
With wet weather continuing, autumn sown crops of feed barley are going backwards from an agronomic point of view, further reducing potential crop production prospects.
This keeps buying interest in the new crop and we are seeing feed mills buying small batches of new crop every week. With values at £20-£22/t under wheat, barley starts the 24/25 marketing year as a very competitive domestic raw material.
Oilseed rape prices are going down as support from the soya market diminishes and trade activity wanes.
Improved weather conditions for planting in Brazil has increased confidence that the country will produce a bigger soy crop than last year at over 160 million tonnes, lifting the global supply potential.
After a jump in farmer selling and crush buying in previous weeks, both parties have seemingly fulfilled nearby requirements. This logistical requirement will continue to be a feature in the market until more domestic rapeseed is sold, with Australian seed starting to enter Europe in the new year.
A developing point to watch is how Argentinian agricultural policy develops under President Milei, with the country's status as a key soymeal exporter an important driver of protein markets globally.
The bean market is currently experiencing a typical decrease in activity for this time of year and there is little change from last week.
Minimal activity from both growers and consumers has resulted in values being left unchanged, as everyone waits to see what the new year brings.
Given the continued high prices of rapeseed meal and other mid-range proteins, the demand for beans remains comparatively robust. However, we expect this dynamic to change as we approach the summer with competing mid-range proteins expected to fall in value.
It's important to note that if you have a remaining stock of human consumption beans, now is the last opportunity to sell your crop before this market concludes in the new year.
Global urea trade has quietened down following last week's trading. This could be owing to reports of offers being withdrawn in the lead up to Christmas and with more suppliers announcing curtailed production. This would indicate a step change in the market.
Latest urea imports statistics for UK show a 22% reduction in the 2023 January to October period in comparison to 2022, but still significantly above 2021 levels.
In the same report, data shows AN imports are 9% down and significantly below 2021 levels. This just further reinforces previous comments on the tightness of supply for spring 2024.
On farm, there has been some renewed appetite from UK farm buyers as they look to secure product for post-Christmas delivery. This is due to increasing confidence in crops surviving the very wet autumn and uncertainty of fertiliser supply – this is understandable as growers seek to ensure their requirements are secured ahead of a likely tight spring supply.
No changes within liquid market to report. However, there continues to be a renewed interest in considering a conversion to a liquid fertiliser system for 2024.
Offers into the market are largely unchanged, with some UK regional market pressure as importers look to capture as much pre-Christmas volume as possible.
The only amendment would be that terms appear to be over several months, rather than spot months.
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