- Politics helps wheat prices jump higher
Wheat prices have recently enjoyed a major price rally gaining £40/t since the middle of June. Markets have been driven higher by adverse weather impacting on crops and cutting output for most of the world's major exporting countries. However, the USDA report last week triggered a sell off and UK prices slipped £12/t from their highs.
The middle of this week saw the markets find an additional driver as political events added to the challenge of predicting price direction. On Wednesday news broke that China was set to send a delegation to the US to renew trade talks and resolve the dispute that has resulted in tariffs being applied to US soybean imports. This had a major impact, lifting soybean and wheat prices.
Having digested this, today the newswires were full of reports that the Russian Agriculture Ministry had met traders to discuss curbs on grain export volumes. London futures jumped over £4/t on the news. This was later denied with the Ministry saying it forecast wheat exports to reach 35 million tonnes this season. However, this situation will need watching carefully. Russia is a key exporter with shipments of all grain since the start of the campaign on 1st July and up to 15th August reaching 6.8 million tonnes. Wheat exports alone have reached 5.5 million tonnes which is 46% up on the same time last year.
- UK wheat loses its premium
Recently UK wheat futures have been trading at a premium to French Matif futures, which is unusual. However, this week amidst market volatility they slipped to trade at a discount. Reduced yields and a small UK crop had driven UK prices to import parity. Port stores will soon be swollen with imported wheat and maize which will help our domestic balance sheet back into surplus.
- Argentina upbeat on crop prospects
Bucking the trend for most of the world's major wheat exporters such as the EU, Russia and Australia, Argentina is enjoying beneficial weather and is expected to increase its wheat output on last year. Their 2018/19 wheat production is forecast to reach 21 million tonnes, up on 18 million tonnes last season.
- Harvest nears completion in the south
Spring barley harvest in the south is nearly complete with only a couple of days cutting left south of the Humber.So far we have seen significant variation in yields between crops on heavy and light land. As well as differences in yield, quality has shown large ranges in grain nitrogen and screenings, often within the same parcel of grain. Harvest has only just started in Scotland with early indications of high nitrogen levels north of the border.
- Feed barley remains firm
The fodder shortage remains a significant factor in the feed barley market. Barley composes a key part of the ration alongside a source of protein, whether that be wheat or corn.
- World crop conditions
In the US crop conditions are good, as sources have been reporting for a while now. However, hot and dry weather through the Plains and Midwest have begun to raise some flags.
Continuing warm, dry conditions in Australia are also giving the market some concern. The forecast is for more dry weather through August and the OSR crops, particularly in the east, are in need of rain.
- European news
The EU was the largest recipient of US soybeans (April-June 2018) receiving 1.25 million mt, up 610,000 mt from the same period in 2017. This is confirmation of what was mooted during early summer, namely that crush plants were switching from OSR to soybeans because crush margins were (and still are) better than for OSR.
Large volumes of Canadian and Black Sea rapeseed are expected to arrive in the EU in the next few months due to competitively priced seed.
This week saw some useful rains across the UK which should aid the planting process for crop '19 OSR. This added moisture is helping to diminish previous concerns around plant establishment.
The bean harvest has stopped over the past week as rain stopped play and with little liquidity values continue to closely follow the wheat market.
With an improved forecast next week we are likely to see more spring beans cut and if the pass rate for human consumption is still poor these will put pressure on the spot feed bean market.
We are more optimistic about the quality and yield prospects of the Northern bean harvest and currently expect human consumption premiums to be £20-£25/ tn depending on location. Further market moves continue to depend on the outcome of the Baltic crop. Early predictions here are of much lower yields but reasonable quality, we should know more next week.
- Rape fertiliser
Recent rainfall has encouraged many to start planting oilseed rape and demand for seedbed fertiliser (DAP and micro-granular) has increased. With more unsettled weather forecast, please give your local Frontier contact plenty of notice of your requirements to ensure prompt delivery.
Global nitrogen markets continue to firm and the reference price for granular urea is now being quoted at over $300/tonne which is the highest level since October 2017. With strong demand from Brazil, India and Europe and low stocks, producers are bullish going into the Oct-Dec period. Current urea offers, although still above where many were looking to purchase, may well turn out to be good value given the strength in urea markets around the world.
- Ammonium nitrate
Because of this firm price for urea and our weak currency, prices for ammonium nitrate are also strong with spot and forward offers now well above £250/tonne. Importers continue to view the UK market with some reluctance given stronger markets on the continent.
With record amounts of straw being baled this year close attention should be paid to replacing off-take of phosphate and potash. With these products under further price pressure, commitments should be made early to avoid future price rises and ensure product is available when required.