- Weather drives markets higher again
Ongoing weather issues and crop concerns saw world markets surge higher early this week, with French wheat futures hitting 11-month highs. The US hard red winter wheat areas, the Black Sea region, North Eastern Europe and Eastern Australia have continued to be dry with above average temperatures. However, elsewhere weather conditions and crop prospects have improved, tempering the enthusiasm of the markets. Canada has seen good rains and normal temperatures across much of its production area. French crop ratings improved slightly from 79% to 80% good to excellent and all US wheat improved by 2% to 38% - good to excellent. The USDA also published their initial grading for US corn and see 79% good to excellent – well above the five-year average 70% and the best initial grading since 1994.
- Russia, Ukraine and the EU downgrade crop potential
Ukraine winter wheat accounts for approximately 95% of their total wheat area but the dry spring conditions have seen analysts reduce the production potential from 25.4 to 24 million tonnes. Southern Russia has also suffered similar conditions, with analysts there seeing a 10% drop in the winter wheat output on the year. In its monthly forecast, the European Commission cut EU wheat production from 141.5 to 140.3 million tonnes.
- UK wheat futures hit new highs
London wheat futures rallied to new contract highs this week spurred on by global weather and the perceived tight UK supply and demand balance sheet. The November 2018 contract jumped to £161.50 on Tuesday before finding sellers who took it £5 lower during Wednesday trade.
- Old crop barley markets quiet
Old crop feed barley demand continues to decline as we are now firmly moving towards the summer months. Livestock outside and good grass growth in most areas following recent rains all contribute to lower compound feeding volumes. Volumes of feed barley now left on farm appear minimal and the carry-over into the 2018 crop year should be towards the lower end of what we would normally expect. Some malting barley markets do still crop up now and again but it is for limited volumes mainly to trade shorts.
- New crop values halt their upward march
During the early part of this week, the cereal market sell offs affected barley alongside other commodities. A change in sentiment and profit-taking contributed to a rapid fall in feed barley price over 36 hours. More recently, values have recovered some of their losses but not all. New crop feed values are however still well above pre-harvest levels that we have seen for the last few seasons and are, in our opinion, still worth locking into especially if harvest movement is required. The new crop malting market remains a bit of a standoff as brewers across Europe have not come to terms with the higher prices caused by the rising feed base, and growers are unsure about new crop yields and quality and the modest premiums that we now see.
- Oilseed market news
This week, continued turmoil in the Eurozone associated with the Italian government was, and may carry on to be, generally supportive for EU oilseed rape prices. Tuesday saw 11-month lows in the euro/dollar exchange rate which has now made some recovery but is still supporting EU crop values. EU old crop stocks remain heavy which is still offering some suppression to EU values – it is expected to be a record carry-over of unsold 2017 crops. This could lead to increased world supplies of three million/t on the year.
President Trump's imposition of steel and aluminium import tariffs kicked in on Friday and this had negative effects on many equities and commodities – another large trade announcement from Trump renews tensions in the US-China trade deal. Currently, limited farm selling on new crop across Europe is supporting new crop values.
The 2018/19 world oilseed ending stocks (all oilseeds) is forecast to increase to 115.6 million/t, this is up 5.4 million tonnes against the 2017 harvest.
- Weather events
The week saw more favourable rains across UK and Europe. This is especially beneficial for oilseed rape crops at this time of the year however, in France there were some concerns over crops due to heavy hail storms in the north of the country. The extent of any damage is expected to be minimal as the crop is still in a fairly strong, fibrous state.
A period of dry weather is expected to return to Australia which could further damage their canola crop development.
The Canadian canola crop is now receiving rain and normal temperatures, which provides a more optimistic view towards their yields. We are currently seeing less-than-optimal growing conditions in the Black Sea region which should offer some support to EU new crop prices.
- Prospects look positive
Continued good growing conditions are certainly helping all pulse crops in the UK and with a strong wheat market holding values up, the economic prospects have certainly improved over the past week. In many areas, new crop beans are valued at £175 ex-farm for feed beans, with human consumption premiums of £20 to £25/t indicated by the market.
- Baltic competition
In Australia, there has been some rainfall in the bean growing areas but a lot more is needed to be assured of good germination on recently planted crops. In the Baltic, a larger seeded bean area is now in need of rain but even with this uncertain picture, Baltic beans are already trading at a £10/t discount to UK values. Looking forward, with the UK bean crop in surplus we are going to see our values kept in check by competition from the Baltic States.
Another week of 'will they-won't they?' as farmers wait for CF Fertilisers to announce new terms for summer reset of early delivery Ammonium Nitrate (AN). The market is ready but CF Fetilisers are still seeing healthy demand for nitram in the grassland sector. Alternative offers of imported AN products are very limited due to currency and much higher European prices. This week, Yara announced a €6/t increase into August for 33.5% AN. This is above an already higher price for this year's June/July tonnes and could be a signal for CF Fertiliser to start the market at a higher level than the trade was expecting a couple of weeks ago.
Very little talk of granular urea now, both on the farm or in the trade due to firmer producer prices and worsening currency. No one has interest in granular urea unless we can justify it versus last year's early offers.