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Please note, since publishing additional content has been added to the written report which is not included in the audio report.
- Russia/Ukraine tensions underpin markets
World wheat markets have seen less volatile trading than they have over the past three to four weeks, but prices continue to be underpinned by the worsening situation in Ukraine. US President Biden said on Thursday that there was now every indication that Russia was planning to invade Ukraine in the next few days. Should this be the case, it seems likely there would be interruptions to wheat exports from the Black Sea region, which is a serious concern considering that Russia, Ukraine and Romania continue to dominate international tenders. This week, Algeria's State grains agency (Office Algerien Interprofessionnel des Cereales), known internationally as the OAIC, is thought to have bought as much as 720,000 tonnes through this week's tender process with offers from several origins including the Black Sea, Argentina and its traditional primary supplier, France. Romania is thought to be the most likely origin given the competitiveness of its pricing. Romania also took the honours in capturing all the sales to Egypt in its tender this week. The General Authority for Supply Commodities (GASC) was spoilt by a long list of offers also including Russia, Ukraine and France and confirmed a purchase of 180,000 tonnes. The selling price, at an average of $338.50/t including freight for April delivery, is about $10/t below its previous purchase at the end of January. Romania, benefitting from ideal weather during the growing cycle, had a record-yielding 2021 wheat crop at 10.4 million tonnes, which was up by over four million tonnes on the previous year.
- Upbeat 2022 Black Sea wheat production prospects
Despite the concerning tensions between Russia and Ukraine, 2022 wheat production prospects are encouraging following comments from officials and analysts this week. The Ministry of Agrarian Policy and Food of Ukraine said the country's winter wheat area was up 400,000 hectares on the year at 6.5 million hectares and crops are reported to be in good/satisfactory condition. Analyst group SovEcon has increased its Russian wheat production estimate by 3.6 million tonnes on its previous estimate to a new total of 84.8 million tonnes based on weather it described as 'ideal'. Kazakhstan has said it sees grain exports for 2022-23 rising to between 8-9 million tonnes from the 7-7.3 million tonnes this season.
- EU and US export pace lacking
Brussels increased EU weekly wheat exports and adjustments by 352,000 tonnes on the week to a new total of 17.273 million tonnes which puts the total just 400,000 tonnes up on the year. Analyst group Strategie Grains recently cut its EU export estimate to 30.4 million tonnes as a result of strong competition in world markets from the Black Sea and Argentina. Algeria is the top destination for EU shipments, having received 2.7 million tonnes to date. It is followed by China at 1.68 million tonnes and Egypt at 1.64 million tonnes. US wheat export sales are slowing and were poor this week at just 118,060 tonnes. Sales for the season to date are running 6% behind the pace needed to meet the United States Department of Agriculture's (USDA) estimate of 22 million tonnes.
- Old crop barley prices remain at significant premium to new crop
The old crop malting barley market remains very quiet, with any demand difficult to find on both export and domestic markets. Although prices have drifted from market highs, nominal prices remain at a significant premium to new crop; therefore, it is important that opportunities are not missed if they appear. Plenty of UK farmers still have unsold malting barley tonnage to sell and today it looks unlikely that there is enough malting barley demand left to accommodate this unsold tonnage.
Maltsters remain more focussed on trying to buy crop 2022 malting barley due to the price discount compared to crop 2021 malting barley. The whole market will look to buy only just enough crop 2021 barley to get them through until cheaper new crop is available. UK crop 2022 malting barley premiums remain strong and UK domestic prices are a significant premium over export values. This is driven by lack of liquidity as farmers look to wait until their spring barley crops are established prior to selling. Looking across to Europe, conditions have been favourable and sowing is well underway. AgriMer reported this week that French spring barley sowings are 27% complete compared with only 16% at this time last year.
- Tensions between Russia and Ukraine impact barley markets
Feed barley markets have weakened this week although there has been little trade to report. Complex factors affecting macro grains related to tensions between Russia and Ukraine have also impacted barley values.
- Markets stay firm
There is currently a lot of bullish news in world oilseeds markets with crop losses in South America and Black Sea tensions being the two key factors in play. US soybean futures have surged by over 30% in the past three months to highs not seen since 2012 and Paris rapeseed futures this week managed to once again rally above €700/t. This market is at contract highs on new crop with £500/t ex farm now available in many parts of the UK. However, this could potentially present new issues going forward as markets are already trading at historically high levels.
Although old crop prices have climbed above £600/t in recent months, other factors are at play: more rapeseed has been planted globally for 2022/23, Canada is not likely to experience two devastating droughts in a row and recent market data has shown that rapeseed and soybean prices do not always move in unison. For producers, current levels could be an opportunity to take some of the risk out of next year's marketing; particularly given that the 2022 crop will not be produced out of cheap inputs.
- Traders watch politics and weather
In the meantime, traders will focus on their two favourite topics: politics and weather. It's anyone's guess as to what the outcome will be in Ukraine but, what is known, is that Black Sea supplies of rapeseed to Europe in the first half of the 2022-23 season will be a crucial part of the supply mix. A premium on new crop prices is expected for as long as the threat of a Russian invasion remains.
Meanwhile, the US Plains remain in drought but soil moisture levels in Canada are improving and Central and Eastern Europe, including the Balkans, are experiencing good rains. However, the main focus is on South American crop conditions with the Brazilian soybean crop now seen by some analysts at as little as 120 million tonnes, which is down from 134 million tonnes last year. China is the big short in the market. The country has speculated that its bean demand might be down by around 30 million tonnes next year, but much of the trade sees this presumption as merely an attempt to push prices lower. Brazilian exports are lagging well behind the expected pace. In fact, last week Paraguay were reported to have been forced to import beans from Argentina – a historic first.
- USDA report next week
The implications for the global soybean market as a result of the problems in South America and its knock-on effect on US exports is going to be huge and will inevitably have an impact on sentiments in the rapeseed arena. The USDA's Outlook Forum is due to report next week and it will be interesting to see how it juggles the numbers. It's clear, however, that markets need high prices to ration demand and to ensure bumper spring sowings of oilseed crops in North America over the next few months.
- Falling old crop feed bean markets
Old crop feed bean markets continue to drift lower with lack of demand and lack of space in port silos. The UK needs to find demand for 50,000-100,000 tonnes of feed beans for the market to get any support and given that human consumption beans are now being sold as feed, it's likely the market will continue to fall.
- Little demand for old crop peas
Old crop peas are in a similar situation with most of the micronisers not looking to take any further cover until the summer months and exports of quality green peas have also slowed down due to lack of demand.
- New crop pulse values strong
On a brighter note, new crop pulse values are supported by strong wheat prices and despite the volatility, feed bean values - at £230/t - are a good starting point for a winter bean crop that is well established and will soon grow away in the spring.
- Nitrogen and sulphur
The nitrogen market saw some signs of life this week with application dates getting ever closer. Tensions between Russia and Ukraine moved gas values higher at the start of the week but, by Wednesday, gas values had fallen as the markets believed a Russian invasion looked less likely. Gas prices continue to be around a similar level to 16th September 2021 when many European nitrogen producers halted production or reduced their plant outputs. Subsequently, nitrogen supply is still limited in the UK.
This week would have been the start of some early 'top dressing' until Storm Dudley came along and very much slowed progress. With more storms due over the coming days, early applications have been put on hold for now. This week has seen more conversations arise regarding sulphur supply and questions around when to make sulphur applications. The market statistics would suggest a shortage of sulphur fertiliser on farm, especially given that the major sulphur producing plant in the UK has been shut since last September. Speak to your Frontier contact for more information on sulphur fertilisers and availability.
- Liquid market update
Early UAN applications across the UK came to a halt last weekend as wet and windy weather conditions presented challenges in travelling and made accurate applications difficult. With Storms Dudley and Eunice hitting the UK over the next 48 hours, further applications may continue into next week with many crops now looking ready for their first dose of nitrogen/nitrogen sulphur.
UK liquid fertiliser suppliers are ready for action with trucks and drivers in place to deliver the approximate 65% that remains of the season's total UAN requirements by the end of April as spring call offs. With increased winter cropping and growth in liquid conversions, planning ahead and not waiting until the last minute will play a key part in a successful spring.
UAN supplies remain tight with offers on the table limited to certain grades around the UK. All supplier offers are price on application, with values based around market price but also around the increasing haulage rates which will have an impact as the spring unfolds. Growers should discuss their outstanding requirements with their Frontier contact at the earliest opportunity to secure the volume and grade they need.
Interest increased this week on potash and phosphate and blended combinations of the two. Demand since late autumn had slowed due to the steeply rising markets for both nutrients but now some demand is coming back. Many arable trials over the years have shown yield increases from fresh applications of potash and phosphates in the spring, especially when soil temperatures start to increase. Potential crop losses from weather conditions may be less likely as the end of February nears, which means it's time to fertilise for yield.
MOP/TSP prices have remained flat over the week with a small concern emerging in regards to the Belaruskali potash supply to Europe via the Ukrainian railway network.
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