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With the Russian wheat harvest progressing further than expected, yields are leading more analysts to revise their crop estimates for Russia - the world's leading wheat exporter.
Total production is now seen ranging between 91 and 92 million tonnes, therefore creating potential for a higher record export target of 49.5 million tonnes. The first two months got off to a racing start, with estimates of 9.5 million tonnes shipped during July and August. However, the government has since imposed an official floor price for new wheat tenders and this may result in a slowing of the current pace.
Other origins, particularly the EU, will need to take advantage of the opportunity and we have seen that this week when the General Authority for Supply Commodities (GASC) held a wheat tender for Egypt. Russian offers stuck to the official floor price of $270 FOB, however, Romania and France offered below that price. Although France has a $5-$7 freight disadvantage, two French and two Romanian cargoes were booked at a price between $259 and $261 FOB. The sales are for October to November delivery and amount to 240,000 tonnes.
Slow export demand is the main price driver for the falling EU and US wheat markets. In comparison to this time last year, US wheat export sales are around 22% behind, while the EU is almost 1.8 million tonnes behind.
Last week, EU countries shipped 431,000 tonnes, taking the cumulative on the 24th August up to 4.49 million tonnes. This pace needs to be at least 600,000 tonnes each week to reach export targets for the season and avoid a burdensome carry over stock. Morocco is the primary EU wheat buyer with 915,000 tonnes taken so far - Algeria is normally the top French wheat buyer but it has only taken half of that so far.
Adding to the current glut of EU wheat, imports are just short of one million tonnes when it was almost double that for the same period last year.
The latest data from Defra pegs England's wheat area for the 2023 harvest 5% down on the year and at 1.58 million hectares, making it the lowest wheat area since 2013. How accurate this is remains to be seen, but it doesn't reflect logic or opportunism given the prevailing wheat prices when farmers were planting the crop last autumn.
This time last year, £250/t ex farm was achievable for 2023 feed wheat and despite the higher input costs presented, a profitable crop return for winter wheat encourages drilling.
Variable fertiliser applications as well as mixed weather and difficult harvesting conditions leave wide-ranging yield estimates for the UK crop but a high carry in and proportional feed quality signals a surplus that is currently uncompetitive to ship, despite the low prices. However, bread wheat premiums remain robust, reflecting a shortfall of domestic supplies and a notable import need to meet miller demand.
Since the bank holiday weekend it has been a quiet week for barley markets.
Demand from compounders has been few and far between, with most feed demand coming from near-term trade shorts in East Anglia and Yorkshire. What little cover we have seen in the forward months has mainly come from the North West region.
Farmer selling has been equally scarce this week, with a modest tonnage coming forward as farmers focus on selling more attractively priced commodities. However, feed prices remain in a bearish trend due to the prevailing lack of demand and may need to continue their path lower for export offers to become competitive.
The spring barley harvest has been progressing well in the UK this week, with some dryer weather allowing farmers to bring the crop in at more favourable moisture levels.
Malting quality in southern England has been relatively consistent, with variability of results increasing further north. There are common concerns around quality which are indicative of a wet harvest. The severity and frequency of the quality issues being recorded remains to be seen, as spring barley harvest in Scotland is gathering pace.
The demand picture for malting and distilling barley is more bullish. With quality concerns in Scandinavia and Europe causing large premiums for low nitrogen barley, both domestic maltsters and foreign importers are looking to the UK to fill the supply deficit developing on the continent.
With the dynamics in play today, it has never been more important to store malting barley in a way that preserves quality. Speak to your farm trader about marketing strategies tailored to your individual farm's strengths and capabilities.
This week rapeseed values have remained steady as the market patiently assesses supply factors, including North American crop sizes and the logistics impact from the continuing conflict in Ukraine.
Following a hugely variable growing season, trade estimates for the US soybean crop size will be mixed and there will be a greater reliance on real crop numbers as the combines start to roll in the coming months.
Further north in Canada, Statistics Cananda (StatsCan) provided an updated view on the canola crop size, putting it at 17.5 million tonnes. This figure is higher than many others in the trade are assuming but if it's accurate, global supply and demand will remain comfortable and the market would likely move downwards.
As always, Chinese demand for oilseeds is a key factor. At present the country is trying to stimulate its economy, though it is somewhat faltering in the face of continuing challenges. This week, five of China's largest banks cut interest rates in an attempt to boost spending activity. Their demand, heavily linked with state of the economy, will be closely watched by the trade going forward.
Other variables in the market include increased vegetable oil production prospects in both Russia and Ukraine. With Russia banning rapeseed exports until February 2024, Ukraine is seemingly restarting some of its rapeseed and sunflower crush capacity after shutdowns put in place at the start of the invasion due to the danger of operating.
Locally, the UK harvest is virtually complete. Yields were averaging around three tonnes per hectare on an area of 342,000 hectares in England, but this week the AHDB reduced this figure by 5% from its last survey, which gives the UK around a 35% import reliance this year.
We have seen values fall this past week, as new crop beans continue to follow wheat. Beyond this price dynamic, we are seeing cheap Baltic bean offers that will be strong competition for UK beans in the export market. However, the effects of this will likely be muted by the poor yields this year. In addition, with domestic demand remaining high, we expect prices will continue to follow wheat in the short-term.
There are pockets of good quality human consumption beans which are making a £20-30/t premium over feed levels currently. However, this premium is unlikely to last after the first cargoes of beans from the Baltic arrive in Egypt, so it's worth getting your beans tested as soon as possible.
The new crop pea harvest has seen disappointing yields, but the quality has been better than expected, with less bleaching and damage than the market anticipated.
High domestic demand, coupled with lower yields, has seen green pea values on farm rise considerably. Ex farm values are over £300/t and have no relationship to wheat prices, which means it is a good time to get in touch with your farm trader to discuss pea values and the bids available.
Due to where we are in the season, there has been an expected dip in buying activity across the UK. This hasn't caused the trade to adjust pricing, however, as urea buying has continued elsewhere around the globe, albeit at a very slow pace.
Egyptian producers, amongst others, are yet to see any firm buying interest at current numbers for September, which is due to the recent slight weakening of urea. It is likely that once we see bigger global buyers find a level that suits their price per tonne target, there will be large global market buying for September onwards and we will see the next step up on urea. The impact on the UK market will depend on how well covered our UK importers are on planned urea shipments or existing stock.
The gas price has climbed to levels that are comparable to spring 2023. This is due to the ongoing strike threats in Australian gas production companies and shows how sensitive and potentially volatile the gas supply market is. It's also having a notable knock-on effect to the nitrogen market. The final impact from gas price changes has been gas futures - 2023 Q4 and 2024 Q1 levels are currently forecast at 1.5 times more than today's levels.
All these factors indicate potential for further price increases, which should be considered if you are yet to book your nitrogen requirements.
If you apply urea-based fertiliser from 1st April onwards, the Agricultural Industries Confederation (AIC) has put together a simple one-page guidance flyer on the use of these products from spring 2024.
The flyer can be viewed or downloaded here. You can speak to your Frontier advisor for more information and advice.
There are few changes to report within the liquid market to date and existing offers remain unchanged.
There had been some smaller volume sellers who looked to marginally move pricing up following a urea price climb, but their change doesn't seem to have made an impact elsewhere in the trade, especially with the bigger sellers standing firm.
Given the current competitiveness around the price of liquid per kilogram of nitrogen (£/kg/N) vs. solid price, we know suppliers will be watching market moves and the cost of raw materials. The advice at this stage is don't hold off if you still have liquid to buy.
There is ongoing talk that MOP manufacturers/importers into the UK are likely to step up prices over the coming weeks. Stock in regional stores may result in price variability depending on location in the short term. If you require a significant amount of MOP for 2023/24 growing season, our guidance is to discuss requirements with your Frontier contact for availability and prices.
On phosphorous materials, again there is a range of pricing across the regions due to import prices. However, on average the national level is rising. For farmers entering the PK market now, some quick statistics would indicate that today's levels are the lowest seen since spring/summer 2021 and all PK levels are just about within the ten-year average price range.
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