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Late last Friday the United States Department of Agriculture (USDA) published its August World Agricultural Supply and Demand Estimates (WASDE), but despite a reduction in year-end stocks for both world wheat and corn, the absence of any surprising bullish data left futures reacting negatively. World wheat production is now seen at three million tonnes lower than it was in the previous month at 793.37 million tonnes. Reductions for Canada are down two million tonnes, while both the EU and China are down three million tonnes. These decreases were offset in some part by increases for Ukraine, which is up 3.5 million tonnes, with Kazakhstan up one million tonnes. Overall, world production will rise by 4.4 million tonnes for the year, and lower use will see world stocks down by 900,000 tonnes on the previous year and 2.7 million tonnes down for the year.
Cuts for world corn production were more notable - down by 11 million tonnes on last month to a total of 1.213 billion tonnes. Cuts for the US in particular are a result of lower yields, with the country now down by 5.4 million tonnes. Russia is down by 1.7m million tonnes, the EU is down by 3.7 million tonnes and China is down by three million tonnes – partially offset by a higher Ukrainian crop up 2.5 million tonnes to a total of 27.5 million tonnes. Overall, production will still be up by 36 million tonnes for the year. Consumption will be down 6.3 million tonnes and despite end stocks being lower for the month, they will still be up by 13 million tonnes for the year.
Russian wheat production estimates are now up to 89.5 million tonnes, supporting a projected record wheat export pace this season - up to 48 million tonnes making it the world's largest wheat exporter by far.
Romania said it would double its shipments of Ukrainian grain through its Black Sea Port of Constanza, moving from two million to four million tonnes per month. Latvia also stated it would help boost Ukrainian exports. However, wheat has to pass through Poland where a different railway system adds complexity and cost, leaving Ukrainian farmers operating below the cost of production.
Russian attacks on Ukraine's Danube ports again this week were largely ignored by traders who extended their speculative short positions. Since the end of the Black Sea deal in July, the first vessel left the Port of Odessa on Thursday. Although not a grain ship, its progress will be key for future potential grain shipments.
India is said to be in discussion with Russia to secure 'discounted' wheat supplies with a need for up to nine million tonnes as previously flagged, but unless confirmed this offers little price support currently.
The latest EU trade data presents a poor picture to date. Wheat shipments have reached 3.724 million tonnes, which is 465,000 tonnes behind the pace this time last year. Wheat imports are almost double on last year so far at 684,000 tonnes. France, which is generally the EU's primary exporter, sits at fourth - trailing behind Bulgaria, Poland and Romania with just over one million tonnes shipped.
UK farmers who have been able to secure bread-making quality will benefit from increasing milling premiums as base prices fall and imported milling wheat prices increase. Only 16% of last autumn's C2 seed sales were Group 1 varieties and the quality fail rate is higher than usual because of the wet weather delaying combining. Germany is the best alternative option for replacement milling wheat, however, the country is also dealing with persistent rain spoiling quality and milling premiums have risen. Other countries, including Poland and Ukraine, have increased volumes of wheat downgraded to feed, creating a surplus which is lowering prices whilst buyers remain scarce.
The feed barley harvest is soon to be finished, with southern regions of the country leading the way with progress of up to 95% being reported in some areas. The crop is looking generally good; yields aren't quite where they were last year but aren't disappointing either. Bushel weights have held up well above the 63kg/hl required for domestic use in most regions and levels of admixture observed this year are significantly down on last year. However, moisture readings have been high where persistent rain has not allowed the crop to dry before being cut. Whilst this can be an issue with feed barley, it is mainly a concern for malting varieties as germination capacity can quickly diminish, especially when not stored correctly.
As the spring barley harvest progresses, it is important to sample effectively to keep on top of issues as they progress. With malting premiums higher than they have been all year, it is a good time to speak to your farm trader about pricing and moving your stocks, particularly if you have any concerns around moisture readings or preservation of germination capacity whilst the grain is being stored on farm.
New crop barley is still struggling to find a bid in the export market. Feed barley is especially uncompetitive as new volume grows domestically as well as on the continent. This is the result of prolonged adverse weather in Northern and Eastern Europe, which has affected quality.
Simultaneously, Ukrainian and Russian feed grains continue to travel into Europe - most recently through Romania, as well as through the existing routes on rail, road, and sea. Although transport costs are materially increased through these export avenues, it remains competitively priced as the cheap prices being seen per tonnage more than offset any increases to insurance and logistical premiums. This increase in supply is on top of an already large European surplus of old crop feed grains.
With spring barley premiums high, moisture issues present at harvest and significant demand not forthcoming, we recommend you speak to your farm trader today about the various malting barley marketing options and their suitability to your specific needs.
Rapeseed values have ended this week higher than where they started, as the vegetable oil markets received a demand boost and weather on the North American continent showed signs of turning dry again. Trading activity within the week saw vegetable oil consumers take some cover and this offered some strength to the market. This prompted crushers to attempt to buy domestic rapeseed from the market, squeezing prices a little as harvest has been completed in most regions.
An unwillingness of buyers to book cheaper Black Sea rapeseed due to the high shipping risks alongside a dry forecast for the US and Canada where crop conditions are expected to turn worse, has helped support prices in the short term.
Meanwhile, in the UK harvest is nearing its close, with only Scotland left with a substantial area to go. Yields seem to have been slightly worse in the south of the country, with performance improving further north and the best yields coming from Scotland. The averages are likely to sit somewhere around 3.2 tonnes per hectare, which is a disappointing reduction from last year but not a disaster.
On a UK ex farm basis, we are nearing ever closer to the key £400/t number in the deferred positions. This will likely be a target for farmer selling and feels with the heavy rapeseed supply and demand could be a good opportunity to sell.
We are now starting to see the first new crop pulses harvested, with varying qualities and yields coming through. This was to be expected, as highlighted in previous reports.
There will be a small window of opportunity to sell shipments of human consumption beans in early September, fetching a 25-£30/t premium before it is likely to be disrupted by cheaper offers from the Baltic region where harvest commences later that same month. This is due to the country's more competitive freight rates, which is why receiving samples is important to determine whether early premiums can be captured.
The demand outlook remains very strong domestically given the early quality issues being seen in UK and European wheat. This is expected to lead to abundant feed supplies and a lack of high protein crop, meaning less price competition to beans in the market.
European ammonium nitrate (AN) producers continue to watch the rising gas price. UK gas prices, along with European levels, are close to 50% up from May this year. This continues to increase costs of production, putting them higher than current markets which are very quiet due to the time of year and harvest underway in some countries. Forward winter gas prices are higher than today, so increased AN prices look very likely as we enter autumn and winter.
Following last week's Indian tender on urea, the market remains quiet as it waits on more news regarding the suppliers. China supplied a significant tonnage, but it looks like India has also booked more tonnes than first anticipated - around 1.8 million. The market's next steps now rely on confirmation of supply dates for this tonnage and how soon India need to come back to the market. Either way the tonnage will keep the market flat to firm, with most producers' order books full for the next few weeks.
Urea will continue to play a major role in UK crop production. Volumes imported to the UK in the 22/23 season will continue to be the norm, as some AN producers struggle to compete with cost per kilogram of urea. Many options are available to protect urea from volatilisation, including Limus Perform on liquid and Sustain as a solid protected urea.
In the UK, CF Fertilisers continues to manufacture Nitram at the Billingham site, following news of the closure of its ammonia plant in late July of this year. It will continue to produce Nitram using imported ammonia from its parent company's ammonia production facilities around the world. Going forward, AN production will have to compete with urea and plants that can use imported ammonia from lower cost regions will have an advantage in the market.
A full range of nitrogen and nitrogen sulphur grades are available following the release of the revised terms from one supplier this week. Other urea ammonium nitrate (UAN) offers into the UK marketplace remain unchanged, for both autumn tank fill and spring 2024 delivery. UAN offers continue to give you the opportunity to cover your farm requirements for the coming season at competitive values against solid systems. As harvest progresses and land is cleared ready for OSR drilling, nitrogen, phosphorus and potassium options are available for prompt delivery in both bulk and IBCs to aid establishment.
As harvest rolls on with some improved weather, we have seen a slow-down in interest for PKs. The potash market remains stagnant, following a slight uptick in prices a couple of weeks ago.
The phosphate market is more nervous, with some likely world buying coming soon. Either way, PKs and PK mixes are good value today compared to recent prices. Diammonium phosphate (DAP), as the main product for OSR establishment, is very limited in supply, with one blender in Yorkshire having no stock at all. This reflects the issues with availability when a slight peak in demand hits.
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