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Despite UK wheat futures prices falling back from their recent highs earlier this week, weaker sterling is now edging them upwards although current values are only £10/t over the futures contract lows.
Consumer demand has helped maintain domestic values, but UK feed wheat export prices remain at least £10/t above other origins irrespective of sterling's fall. Therefore, feed wheat exports remain uncompetitive and aren't attracting any fresh business. To date, UK wheat shipments into the EU amount to little a more than 90,000 tonnes and currently face stiff competition from Ukraine wheat.
Almost one million tonnes of Ukraine wheat has made its way to the EU so far this season, despite the Russian withdrawal from the Black Sea export corridor deal in July. Poland enjoyed near record yields, but the results highlighted diluted protein and a high proportion of feed quality. This provides additional competition for any UK feed wheat exports.
The scale of the UK 2023 wheat output is less than anticipated. Defra's June survey of agriculture and horticulture put the England area 5% down on the year, and with variable yields a UK crop below 14 million tonnes could be possible. This suggests a less heavy exportable surplus depending on domestic demand.
The feed sector remains challenged by inflationary pressure and consumer buying power. However, the UK bioethanol sector remains robust so far. Nonetheless, it would seem likely at some stage UK feed wheat values will need to fall relative to other origins to generate export demand.
The Bank of England elected to keep the UK base interest rate at 5.25% rather than raise it for what would have been the fifteenth consecutive time. The pause comes in response to inflation metrics falling more than analysts expected, though it caused sterling to weaken further on Thursday.
Notable export sales in recent days have supported EU wheat prices, despite Russia taking a large part of the business.
Last week, it was reported that France sold between five to ten wheat cargoes to China but French wheat has proven uncompetitive in subsequent trade to North Africa countries.
Russia is thought to be the likely origin to supply sales made to Algeria this week, at values in the region of $272 including freight. This implies FOB values for Russian wheat that are in the higher end of $230 are significantly below the country's supposed wheat floor price of $270 FOB.
Adding confusion to Russian export sale values, for this week's Egyptian General Authority For Supply Commodities (GASC) tender all of the Russian offers maintained the $270 FOB floor price. This allowed Romania to capture the business and it sold 120,000 tonnes at $272 including freight – the same price paid by Algeria.
EU wheat shipments to 17th September reached 6.319 million tonnes which compares to last year's figure of 8.699 million tonnes. US shipments at this point are 29.5% down on last year too.
Black Sea origin wheat continues to dominate international trade and the poor US export pace has encouraged the speculative funds to build a rarely seen short position on Chicago Board of Trade (CBOT) wheat futures - over 90,000 contracts.
Fundamentally, the market does have supply issues building in the Southern Hemisphere. El Niño is strengthening and Australia is getting hotter - the latest wheat production estimates there are falling and are now as low as 24 million tonnes. Last season, Australia harvested its third consecutive record wheat crop just short of 40 million tonnes.
This week, grain markets have given back most of the gains from last weeks' World Agricultural Supply and Demand Estimates (WASDE) report.
Domestic feed barley values, which did not increase as much as the wider market last week, have followed the markets lower. With limited compounder demand forthcoming and farmers still undersold relative to this time in previous seasons, the bearish price direction looks set to continue for the time being.
Spring barley premiums have come down very slightly from their peaks, but we continue to see variable sample results in some parts of the UK as new crop sampling continues.
As previously mentioned in this report, sterling strength has started to ease relative to the euro following the Bank of England's decision to halt further rises to the UK base rate. This has allowed the UK to compete with other sources of barley from Europe.
Most significantly, grain is still flowing into Europe through Romanian ports, as well as by road and rail. This consistent supply of cheap grain is keeping export offers at levels materially below UK premiums.
Rapeseed prices have had an exceptionally volatile time during the last week, as conflicting factors create a push and pull effect on the market.
The price of rapeseed relative to other oilseed sources, particularly Canadian canola, gave some support to prices, but working against this is the high levels of European crusher cover. This limited any potential gains. This is reflected in a historically large spread in the market between MATIF futures from November to May.
In the European market, Ukrainian seed is continually offered at a considerable discount to other origins. As a result, buyers are making the most of this where they can guarantee a logistical route out for the seed, which is dampening market prices further.
In the US and Canada, soybean and canola harvests are starting to progress quickly at a slightly quicker pace than expected. Whilst this is putting some typical harvest pressure on markets, crops are a little disappointing – highlighted by the US soybean crop which is rated only 52% 'good/excellent'.
Energy markets took a slight step back this week following a dramatic rise in oil prices after Organisation of the Petroleum Exporting Countries (OPEC) members cut production levels several weeks ago. This is an important market to watch as it has been providing some much needed support for vegetable oil markets. Oil traders and hedge funds are watching with anticipation to see if oil hits $100 a barrel again.
This week bean values have stayed steady, with little change in prices due to the market still following London wheat.
Although values have remained unchanged, we are still seeing a consistent high volume of farm selling as growers are eager to take advantage of high premiums relative to wheat.
We're seeing an increase in availability of feed beans as Baltic crops get downgraded to feed from human consumption. This source of beans remains competitive into the UK market which ultimately will add further pressure to UK premiums.
However, there remains an opportunity for the right quality of beans to be sold for human consumption, adding further to the premiums achievable over feed.
UK ammonium nitrate producer, CF Fertilisers, has now re-entered the market following several weeks with no offers. Levels are up £15/t on previous numbers. This UK offer is for early spring delivery and remains competitive in comparison to other AN options at earlier delivery timescales.
The latest Indian urea tender has now been published at 3.6 million tonnes against its 1.2-1.5 million tonne requirements. Due to the bullish offers and traders' reluctance to discount counter offers, only 525,000 tonnes have been awarded. Another tender is likely imminently.
Physical availability will be a challenge for any global spot buyers, as shipments for early October are yet to be placed and the uncertain Chinese volume availability is not likely until mid-November.
There has been no change from other ammonium nitrate suppliers in the UK following CF Fertlisers' news and urea importers to the UK have made no changes following the recent Indian tender news.
Another week of no changes to report at this stage from liquid suppliers. Although these suppliers may not react instantly to small incremental changes from the CF Nitram offer, they will most certainly know that their current spring liquid offer now looks very competitive in comparison.
If you use liquid fertiliser, our advice is not to be too relaxed with buying as result of there being no changes. You can stand yourself in good stead by ensuring that your requirements are booked for tank fill and/or spring delivery.
PK buying interest ramped up last week, perhaps as growers' confidence in their oilseed rape crops increases and winter cereal planting plans are finalised.
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