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- Wheat markets continue to fall
Improving US harvest prospects saw Chicago Board of Trade (CBOT) wheat futures come under increasing pressure this week, losing almost 4% of their value and falling to levels not seen since early September last year. The US wheat harvest is advancing rapidly, with 15% completed according to the most recent crop progress report from the United States Department of Agriculture (USDA), which was published on Monday evening. This figure compares to 7% at this time last year.
Although wheat crop condition ratings slipped one point on the week to 50% rated 'good' to 'excellent', some early yields are reported to be better than expected. In Texas, the wheat harvest has advanced to 68% complete; well ahead of the 38% completion this time last year. The USDA estimated that US farmers would increase their corn planting by over seven million acres, which has now been realised.
Corn crop conditions slipped four points to 71% rated 'good' to 'excellent'. This is well ahead of the figure at the same time last year, which was only 59%. However, there are some contradictory views on US corn planting. In its latest update, private analyst Informa predicted that the volume of corn that US farmers will plant is 2.9 million acres less than the USDA's estimate. If this proves to be the case, the USDA's US corn crop estimate of 406 million tonnes would be 13 million tonnes too high.
- Mixed message for Russian crops and exports
In a statement this week, the Ministry of Agriculture of the Russian Federation increased its grain crop estimate from 120.5 to 122.5 million tonnes. It predicts that wheat production will reach 75 million tonnes compared to the 73.6 million tonnes in the 2019 harvest. This estimate is well below those from other private analysts, which have recently been as high as 82 million tonnes. Nevertheless, the ministry also said it would allow wheat exports to be free of quotas in the first half of the season, which runs from the 1st July 2020 to 31st December 2020. The market took this as a bearish signal, which added to the weakness seen this week. However, the ministry also said it would impose quotas in the second half of the season from 1st January 2021 to 30th June 2021 and that it would determine its export forecast after the harvest.
- Production issues highlighted for Ukraine
The National Academy of Agrarian Sciences of Ukraine predicts that wheat crop losses caused by drought in southern Ukraine will amount to 15-30%. For some regions of the country, this estimate rises to as much as 50%. The Ukrainian Ministry for Development of Economy, Trade and Agriculture confirmed its grain crop estimate at a figure of 68 million tonnes after having previously given a range of 65-68 million tonnes. This is well below estimates from private analysts such as ProAgro, which recently released its own estimate of 74.4 million tonnes. The ministry also said it would stop publishing export data as it was affecting the market situation. It had previously set a wheat export quota of 20.2 million tonnes for the 2019/20 season; this was reached early this month. The Ukrainian government has allowed exporters to continue to make sales.
- Egypt buys cheaper wheat
In Egypt, the General Authority for Supply Commodities (GASC) held another wheat tender yesterday for shipment between the 25th July and 5th August. Egypt took advantage of lower world prices, buying from three separate origins: Romania, Ukraine and Russia. On average, prices were around $218.40/t including freight. These values were $9/t below Egypt's previous tender on the 10th June. Russia proceeded with this tender, in spite of freight rates that were $2/t greater than its previous sale, reflecting the soaring freight rates in the shipping market.
- Rain stabilises English barley crop
Recent rainfall totals have been sufficient to prevent further deterioration of the barley crop in England. Between 8mm and 12mm fell last week and this week, up to Thursday night, many areas of England received another 20-30mm. This means we are unlikely to see further yield and quality losses due to the soil being too dry. Warm weather expected next week should help the crop push on to maturity nicely. Scottish crops have faced less of a challenge since planting and look around average compared with averages from the previous five seasons.
- Barley values retreat
Whilst barley's discount to wheat has maintained itself at around £32-34/t, it has come down in price along the general drift in wheat markets. Last week's USDA report was not particularly bullish to wheat markets due to rising stocks and muted demand. In addition, production estimates for Ukrainian and Russian maize, wheat and barley crops increased this week due to the rains of late may and early June improving yields. This week also saw buying tenders by Tunisia and Saudi Arabia for a total of 1.2 million tonnes. The tenders were won by supplies originating from the Black Sea areas, reducing prospects of exporting UK barley to these areas in the near future.
- Harvest starts in Spain and south-west France
Although there are few reports thus far, Spain in particular is expecting a big crop compared with last year - up 60-70% - and also up on the five-year average by 20%. There has been little buying interest from our major barley trading partner. In France, wise early yields are average and quality is so far proving of a reasonable standard. The French are hoping for a large amount of Chinese business this year for feed and malting barley due to the imposition of large tariffs on Australian barley when exported to China which have been brought about by an anti-dumping investigation. This is holding French barley prices significantly above other EU and Black Sea values.
Overall, there is a negative tone in the barley market for prices, due to greater confidence of supply and harvest selling pressure. More positively, it is one of the cheaper feed grains of the world and demand should be relatively strong if it remains so.
- 25-year low for UK production
It has been another week of flat pricing on European rapeseed trading, with UK domestic prices improving marginally; although, this is mainly due to weaker sterling rather than any change in market fundamentals. The EU crop continues to be revised downwards and is now expected to be at a 14-year low, which would be roughly a third of the crop volume harvested as recently as 2014. In the UK, a crop of only 1.1 million tonnes is forecast, which represents the lowest output figure for 25 years. However, the projected rapeseed crush volumes in Europe are also expected to be sharply lower due to a combination of demand loss due to the Covid-19 pandemic, a rapeseed price that is high in relation to other oilseeds, and a simple lack of supplies. The EU's import requirement will be close to unchanged in 2020/21, but the lack of availability of early season supplies from Ukraine could restrict crush volumes until Australian supplies come on stream from December onwards.
- Chinese booking cheap US beans
Elsewhere, markets have received some encouragement from renewed Chinese interest in US soybeans. Two more confirmed cargoes this week have lead both sides to express optimism that the 'phase one' trade deal can be fulfilled, although cumulative volumes are still way off the pace needed to achieve this. US weather is set to be favourable for the rest of this month and into early July. In addition, traders are anticipating confirmation of a higher bean acreage in the USDA's June plantings report. On the back of all this, US soybean markets have dipped to their lowest level since the start of the month.
- Impact of rainfall on yields
The recent rainfall in all areas of the UK will make a significant difference to final pulse yields for two reasons. Firstly, the warm humid weather will lead to stem elongation which will help harvesting, as many of the spring bean crops are very short, leading to potential harvesting problems. Secondly, the forecasted growing conditions will also allow later crops to continue flowering with greater pod set and better pod fill.
- Baltic bean offers expected soon
Market-wise, there has been very little trading activity, both internationally and domestically, over the past two weeks. In Egypt, the government announced a continued export ban on all domestically-grown pulse crops, putting further pressure on old crop markets. As in the UK, growing conditions have also been perfect in the early-sown Australian crop and Baltic beans are also responding well. We expect to soon see offers of Baltic beans which will set the tone for the UK market in the coming weeks.
In Egypt, one of the main sources of urea to Europe and the UK, the granular urea market traded at $240/t FOB - equivalent to £240 delivered to farm in the UK. This is £20-25 up on the May offer to the UK. This move appeared to catch a few of the trade out, leading urea prices to firm late Friday and early Monday with most urea suppliers pulling offers and coming back into market much higher. European nitrate offers soon followed the urea market, with a €4-6 increase for August offers. Given the UK nitrogen market was already well below Europe, CF Fertilisers followed on Wednesday, withdrawing current terms. New terms are expected in next few days and are likely to remain under the French market which isa good measurement of how competitive the UK market is.
The PK market remains quiet with little interest apart from a few orders to top-up roots and grass. Currency is something that will need to be monitored closely going forward.
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