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- Freezing US temperatures leave volatile markets
A period of extreme cold has affected the primary US winter wheat producing states in recent days. Temperatures nearing record lows of between -15-20°c have been recorded as far south as Texas and concerns that wheat crops will be subject to winter kill has triggered volatile trading in Chicago Board of Trade (CBOT) wheat futures. Prices rallied to their highest since the end of January as the chief meteorologist of the United States Department of Agriculture (USDA) suggested crops in Texas and Oklahoma had been lost to the severe cold.
- US farmers set to increase planting
This week at its Annual Outlook Forum, the USDA said that it expects to see a record combined area of US corn and soybeans of 182 million acres. US farmers, encouraged by seven-and-a-half-year high prices will increase their corn planted area to 92 million acres this spring, compared to 90.8 million acres last year. The US is the world's leading corn exporter and this season will see its shipments rising by 21 million tonnes on the previous year to 66 million tonnes. This is helping to meet increasing demand to China where corn imports will rise to 24 million tonnes, which is over 17 million tonnes up on the year.
The USDA sees the US wheat area to rising from 44.3 million acres last year to 45 million acres this year.
- Record wheat crop in Australia
Until this year, Australian farmers had endured three consecutive seasons of extensive drought and, as a result, poor wheat yields and low production. However, this season's wheat harvest will be a record after heavy rains triggered by the La Niña weather system benefitted the country's key wheat producing regions, boosting yields.
The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) said this week that the country's wheat production will be a record high of 33.34 million tonnes; this is above the previous record set in the 2016-17 season of 31.18 million tonnes. Last week in its World Agricultural Supply and Demand Estimates report, the USDA put Australian wheat production at 30 million tonnes and will therefore have some adjustments to make in March.
The USDA sees Australia exporting 20 million tonnes of wheat during 2020-21 compared to just nine million tonnes during each of the two previous seasons. It is ideal timing to have a bumper crop to ship with wheat prices at seven-year highs.
- Old crop feed barley prices mark time – await news
It appears that maize and wheat prices will end the week on a firm note in the USA, South America and Russia due to weather related issues, while barley values in the UK have stayed stagnant this week. A combination of strengthening sterling, increasing sea freight costs and lack of European demand have matched the bullish features elsewhere in the world. Barley remains cheap against wheat and corn in the export ports and domestically but probably need more demand from feed compounders locally and in the EU to get things moving again. It's predicted that sterling will get stronger over the next few months, which may take the edge off values as the UK still needs to export around 200,000 tonnes to balance the supply and demand situation of crop 2020.
- New crop feed barley prices head to contract highs
Cold weather, half-term holidays in the EU and spring sowings yet to begin have meant barley prices for new crop outside of the harvest position are holding up well. Domestic interest is the prop to prices as UK export customers in Spain, Portugal and Ireland are not interested at these levels, leaving harvest prices lagging behind autumn ones. With the prediction of an exportable surplus of one million tonnes, something has to change here eventually. Barley's discount to wheat has returned to levels closer to the long-term average of £12-17/t. The precise discount is now dependent on location.
- Drier weather for east England
While soil is still wet and cold at the moment, it looks like drier weather is set to arrive next week. Some sowing was completed on light land when the frost was in the ground earlier in the month. Even though the spring barley area will retreat by 30% to 750,000 hectares, this area is still relatively quite high compared to averages historically. With the return to pre-Covid levels of beer consumption a long-term target, growers should be thinking about their marketing strategies for the 2021 crop.
Frontier has a range of minimum to maximum premium barley contracts offering a two-step process to pricing a grower's malting variety. Contact your local farm trader to find out more.
- Markets bounce back despite strong sterling
After last week's sell off triggered by a seemingly bearish USDA report, rapeseed prices have recovered strongly this week with domestic levels gaining £15/t at one stage before stronger sterling pushed levels lower. This was all achieved without the usual impetus provided by Chinese buying over the Chinese New Year and it will be interesting to see what impact China's return to work will have on markets. South American weather remains unhelpful with a lack of rain in Argentina reducing crop expectations and too much rain further north hampering the Brazilian soybean harvest. In turn, this is preventing supply channels switching away from the US.
- EU demand higher than forecast
EU rapeseed markets continue to be tight. Domestic oil demand in 2020-21 for both food and biofuel use has held up more strongly than was seen in the lockdowns last spring and recent sales of rapeseed oil to China have also supported crush volumes. We are likely to see 23.5 million tonnes of seed crushed in the EU-28 countries in 2020/21, which is about 1.5 million tonnes below the volumes seen pre-pandemic but still higher than most traders were forecasting a few months ago. With EU stocks and output both lower this season, the block is on course to import a total of 6.77 million tonnes, which is 40% up on the average levels over the previous four years.
- New crop markets tight
This all suggests an even lower EU stock level going into the 2021/22 campaign, which will be counterbalanced by slightly higher production, leaving the overall supply position close to unchanged on the new crop. If demand returns to pre-pandemic levels, this will lead to a higher import requirement with particular emphasis on the early part of the season before Australian supplies become available early in 2022. With supply stagnant at best in the EU and Black Sea regions, much reliance will be placed on Canada to satisfy any excess demand. The global stocks-to-use ratio for rapeseed and canola is expected to drop to a perilously low level of 9% at the end of 2020/21, suggesting that 2021/22 is well set up to be a seller's market.
- Old crop bean market peaking
The old crop bean market certainly seems to be peaking, especially in the east where there are still plentiful supplies left unsold and limited export demand due to rising sterling values, which reduces UK export competitiveness. It's a different story in the west where consumer demand is still strong, especially for the summer months. However, to achieve the best values, old crop holders will need to carry through to May and June. Old crop premium markets are very elusive with the ongoing wave of shipments arriving in Egypt from Australia continuing to depress values.
Global urea values are largely unchanged from last week at $380/t freight on board into Europe. However, further Indian tenders in addition to production issues in North America will keep pricing high for the next few weeks at least.
On Tuesday, UK ammonium nitrate prices increased a further £5/t for February and nitrogen sulphur grades have firmed on the back of this.
Growers are advised to consider crop nitrogen demand as areas of the UK have had high levels of excess winter rainfall which will have caused an increase in leaching of nitrates and sulphates. In some areas, this has been equal to or greater than what was experienced in autumn 2019 to spring 2020.
Weather issues across Europe have led to a slow-down in supplies of potash and phosphate into UK ports. As a consequence, deliveries onto farm have slowed. It remains the case that further strengthening in potash and phosphate prices is yet to come and we will see these increases affect straights and blend prices over the coming weeks. Growers should buy now to avoid further price rises.
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