- Turbulent wheat markets
The world's wheat markets started the week extending their recent downward trend. Speculative fund selling took the US CBOT wheat futures to contract lows on Monday, pulling European and UK wheat futures lower too. Their motivation comes from slow US wheat export pace and expectations for a bounce back in production for many of the world's major wheat producers this coming harvest. However, those expectations are far from realised and adverse weather, flooding and high winds developing in the US midwest triggered a turn around on Tuesday. By Friday, fund short covering saw CBOT futures post a 6% gain in prices and their strongest rally since last summer.
- Politics, tariffs and currency
Amidst a volatile world market this week, the UK grain trade has also endured the continued Brexit chaos, its potential impact on trade flows should we leave the EU on 29th March and also the resulting sterling volatility.Mid-week, the Government published its import tariff schedule which confirmed, as many traders expected, that the UK would not apply any tariffs on imported wheat.
- EU wheat exports pick up
The first half of this season saw Russia dominate the world export trade at the expense of the US and EU. However, as Russian supplies have become harder to source, EU exports have become more competitive and captured an increasing volume of trade. At the turn of the year, EU wheat exports were running 27% behind last season's pace but that gap has now narrowed to just 11%. This improvement lead analyst, Strategie Grain, to increase the EU-28 export target by 600,000 tonnes to 19.3 million tonnes in their March report published this week. This also helped lift old crop French wheat futures seven euros from their Monday lows.
- Longholders pressurise old crop feed barley
Continued attempts, largely by merchants, to sell any remaining supplies of crop 18 feed barley have driven its discount to feed wheat to nearly £30/t in most locations, with the exception of Scotland where it is closer to £20/t. Old crop values around an £8-£10 premium over harvest values means a further downside is limited in the short term at least. Old crop demand to the major compounders is limited by slow sales to the ruminant sector due to the mild and early spring, high maize usage and their need to buy wheat rather than barley to make the ration's specification.
- Spring barley sowings on hold
Due to the recent rain, little progress has been made this week. England ranges from 50-90% sown and Scotland around 25%. In Europe, France is fully planted, Germany is at 40% and Scandinavia is no more than 10-15%. However, there is plenty of time left to sow and the forecast turns drier for next week.
With the winds we are currently experiencing, fields should become workable sooner rather than later.
UK maltsters need further brewing interest before they return to the market, while on the continent and their barley suppliers are still trying to cover sales made at a few euros lower. Farmer selling is non–existent at these values due to it being too early in the growing process to commit. For those growers across Europe who have planted, the recent rain has given the crop a good start.
- Stable old crop markets
There has been little change on UK physical prices this week considering the volatility around sterling given all the discussion that has been going on with Brexit in recent days. There remains some optimism that the US/China trade dispute is moving close to a resolution but the Trump/Xi summit meeting appears to have been pushed further into April. In the meantime, the Chinese ban on Canadian canola imports continues to have a dampening effect on European rapeseed prices. The end of strike action at the large crushing plant in Rouen offers some help but UK prices remain relatively high, increasing the risk of further imports from other origins.
- Weather watching
New crop is all about watching the weather. We know that winter sowings in the EU are sharply lower and some areas in the south and east are still too dry. Dry conditions are also evident in Ukraine which is now viewed as an important potential provider to the EU, given that their winter planted area has tripled since harvest 2016. Drought conditions are also persisting in Australia – which is a regular EU supplier – but overall the subdued new crop markets are indicating that the trade is pretty relaxed about adequate supplies and stocks for 2019/20.
- Little demand keeps prices low
Despite the apparent lack of available beans for sale there are still a few loads coming to the market. However, with no buyers to the ports and consumers reluctant to buy at historic high levels, prices continue to drift lower.
- Crop progress
Early drilled spring beans are just coming through the ground and, despite germination concerns, it appears most of the seed has sprouted. With a warmer and drier weather forecast for next week we should get a clearer picture.
- New crop values
New crop values continue to follow wheat futures and this week's mini rally has seen new crop beans trading at £190 to £195 for feed quality depending on location.
Following CF Fertilisers' reduction in price, we saw another reaction from the importers who slightly dropped their levels again. However, the last seven days have been quiet on nitrogen business given the current weather conditions. New imported cargoes are pretty scarce, although the currency has improved, but given the political climate surrounding Brexit it remains unclear if a tariff of 6.5% on imported nitrogen and other fertiliser products will be introduced.Please look at your nitrogen requirements before the end of March and speak to your Frontier contact.
- NPKs, PKs and straights
Demand is still high on straights and PKs, causing issues on bookings to move products. Some producers have seen delays in raw materials coming to the UK which has caused a backlog of product being delivered to farm. Logistics remain under pressure.
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