· Harvest pressure caps prices
The Northern Hemisphere wheat harvest is well underway with France now as far as 50% complete; poor demand remains a theme. As a result, European markets traded steadily lower as the week progressed, with LIFFE November futures losing almost £1/t per day. The week began with spill-over support from last week’s bullish USDA report. Futures climbed just short of £150/t on Monday which the some now view as a short term upper limit. Favourable weather forecasts for the next 10-14 days across most of Europe will no doubt accelerate harvest progress. There is therefore potential for further price-pressure as growers weigh up harvest logistics and cash flow.
· Can the rest of Europe compete with Russia?
This week Egypt tendered for 60,000t of new crop wheat and the order was filled entirely with Russian wheat due Russia out-pricing the rest of the competition. This is despite recent price support following a series of reports downgrading the size of the Russian crop well below the original 80-85 million tonne range. As a result, it feels as though competing exporters will have to revise their price expectations lower in the ports to win business into North Africa and avoid a heavy build up of harvest stocks. Even with crop revisions closer to 76 million tonnes, it’s likely Russia will still harvest their second largest crop on record and will export around 33 million tonnes of this.
- UK Feed barley harvest gathers pace
Feed barley is starting to come forward at a greater pace particularly in the south. Meanwhile barley north of the M25 and East Anglia has also now started to flow. Positive yield reports have been received so far from all regions with some as high as 10t/ha. The unsettled forecast looks like it may hold some growers back this weekend but with warmer conditions expected during the week more progress should be made. With plenty of bids into a range of southern ports, early supplies should be snapped up to feed the range of vessels which have already been sold.
- Early malting barley quality encouraging
Early winter malting barley cut so far is also showing promising yields. Much like last year, Craft quality is good with low screenings and good nitrogen content. Some parcels of Venture are, as last year, showing higher levels of screenings when compared with Craft.
- European barley harvest update
In France winter barley harvest is complete and spring barley is now being cut. French winter yields are above last year, particularly in the north of the country, with the dry spell last month coming too late in the growth cycle to have a significant impact. Higher yields are also being reported across the continent. However, production in Spain - a key export location for the UK - is estimated to be reduced from 2018. Export opportunities continue to present themselves this week from harvest until October for both feed and malting barley.
- Firm domestic prices
Markets have edged higher this week and currently sit £10/t above levels seen at the start of the month. Exchange rates over this period are close to unchanged, and Paris rape futures have not firmed to the same degree. Therefore the recent price rise is partly due to domestic factors.
- UK and EU production thought to be lower
It is still too early to be able to make a certain judgement on UK OSR yields from harvest 2019 but we do know that the AHDB plantings survey, published earlier this month, pegged English plantings down by 11% and Scotland down by a more modest 6%. This represents the lowest planted area since 2003. Additionally, the EU is expected to see at a 13 year low on rapeseed production with final levels likely to be 11% below last year. Imports from further afield are therefore inevitable and the market is currently reflecting this situation. When any market trades at import parity further price gains need to come from either Sterling weakness or the wider global market.
- World markets stall
Better US weather this week has put the brakes on Chicago soybean futures. Most of the key growing areas have recently received beneficial rains and the National Weather Service's 14 day forecast is for below normal temperatures. Planalytics, the business weather specialists based near Philadelphia, raised their yield estimate by almost 1% and this is against a background of high stocks and weak global demand. The US/China trade war rumbles on but meantime the Chinese pig herd has officially shrunk by 24% with some private forecasters seeing it down by as much as 50%. Chinese pigs are massive consumers of soybeans and the USDA recently reduced the import figure into that destination by a significant 5 million tonnes.
- Domestic markets holding up
We are a matter of weeks away from starting the UK pulse harvest and the weather continues to be close to ideal. We are expecting a much larger crop of beans this year, possibly 25% more than last year's drought affected crop, but it is likely to be quality that will be the key driver of prices. Good quality will push human consumption export volumes higher and restrict supplies to the domestic feed consumer. The ordinary feed compounder demand is all but priced out of the market at current levels and even the fish sector is showing some resistance to higher prices. Current farm levels in excess of £200/t ex farm could look expensive in a few weeks time.
- Weak global fundamentals
In the wider market we are not seeing much bullish news with recent rains helping winter sown beans in Australia, and Egyptian demand being hampered by high stocks and delayed shipments.
Nitrogen markets have taken a back seat as attention turns towards harvest. UK prices remain stable, although we are yet to experience the increases seen in Europe in recent weeks. A recent large tender for granular urea into India has prompted some activity in urea markets, as traders struggle to cover in the volumes required from suppliers in Asia (specifically China).
- Uncertainty around oilseed rape planting
With some growers still hesitant to commitment to OSR, many have delayed making any decisions relating to nitrogen sulphur grades. This may lead to increased demand in October-December and so it is advisable that growers book as soon as they know their requirements to avoid potential issues with a tight supply market this year.
For those who do plant oilseed rape, establishment is key to the success of the crop. A cost-effective starter fertiliser programme should be considered; talk to your Frontier contact for information about the best solid or liquid options for your system.
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