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- Markets soar higher
Persistent cold dry weather affecting much of the US and Western Europe coupled with ongoing Chinese demand drove wheat and corn markets sharply higher this week. Chicago Board of Trade (CBOT) wheat futures have gained over 8% since last Friday's close and are trading over $7 per bushel, bringing them to their highest level since May 2014. European new crop wheat futures have been equally impressive, setting new contract highs. London November 2021 wheat futures are now £26/t above their end of March low.
US winter wheat crop ratings were unchanged on the week with 53% rated 'good' to 'excellent' which is four points below last year. However, subsequent reports from Oklahoma of frost-damaged winter wheat helped galvanise speculative buying. Corn planting reached 8%, which is average for this time of year, but the cold US weather conditions are seen delaying crop establishment and yield potential, therefore adding more demand for depleted old crop supplies. Record low April temperatures coupled with a lack of rain is increasingly concerning for wheat crop production potential in Western Europe.
There have been rumours of China buying a further 1.5 million tonnes of US corn and reports that the country had also bought between 500,000 to 600,000 tonnes of new crop French wheat for shipment between July and September. It is thought the astute Chinese buyers secured their purchases earlier this month ahead of the subsequent wheat price rally. China has bought approximately 1.6 million tonnes of French wheat in each of the past two seasons.
The agricultural attaché report produced by the USDA Foreign Agricultural Service (FAS) in Beijing sees China importing 28 million tonnes of corn this season; a huge jump on last season's total of 7.6 million tonnes. The April estimate from the United States Department of Agriculture (USDA) was 24 million tonnes.
- Winter kill leads to revised Russian estimates
In recent weeks, analysts have fallen over themselves in a race to the top for their 2021 Russian wheat crop estimates. Beneficial weather for winter wheat in southern Russia has taken those estimates as high as 81 million tonnes. However, this week, with winter wheat crops breaking dormancy in the central Black Earth region, some farmers have reported winter kill of between 25% and 100%, leaving it doubtful the Russian crop will achieve 80 million tonnes. This has led analysts to cut their estimates, with the highest now at 79.5 million tonnes.
- Mixed fortunes for South American corn
Corn crops in South America have endured long spells of adverse weather which has raised concerns for production potential and, in recent weeks, added strong support to world grain markets. Heat and dryness have persisted in much of Brazil. In Parana, the second largest corn producing state, this led to a sharp decline in corn crop ratings which have fallen to only 62% rated as in good condition. This is down from 76% the previous week and 92% the week prior.
However, in Argentina, the Rosario grain exchange has increased its country's corn production estimate from 48.5 to 50 million tonnes due to a higher planted area than anticipated and strong yields in the Cordoba region. In April, the USDA cut its corn production estimate for Argentina to 47 million tonnes with other analysts predicting lower output.
- Strong rally on old crop feed barley
Slow grass growth due to the cold April, return of confidence to the hospitality sector and the possibility of a slightly later harvest have sparked new buying interest for old crop feed barley, with the majority of this interest coming from the south west, north west and Yorkshire feed compounders.
In these areas, prices are within £5/t of this year's high, making it a good time for those with remaining supplies to finish off the marketing year following recent price lows.
- New crop barley prices feed off the general rally in wheat and maize futures
Feed barley has been swept along in the new crop raw material price rally due to tight old crop maize stocks in North and South America on the back of huge volumes of Chinese imports, dry weather for newly planted Brazilian maize and demand for a large US maize planting area to combat low stocks into 2022.
In the UK, much-needed rain is not in the forecast. The discount of barley to wheat seems to have settled at a minimum of £15/t under wheat for the foreseeable future as growers are reluctant to make too many commitments at this stage. At these prices, compounders are likely to switch to alternative raw materials.
- High prices not rationing demand
Domestic prices of oilseed rape have been up more than £20/t across the board in the past week, leaving the market to question how high prices will rise. The global demand for oilseeds products is proving to be very static. The market is recognising this low global stock level and is attempting to ration the demand through higher prices with little effect.
US soybeans are a good example of this strategy failure. Earlier this month the USDA marginally increased its estimate for US old crop bean stocks. However, even with this higher estimate, end of season stocks will still be close to zero due to pace of exports and current domestic crush rates.
CBOT meal and oil futures found new contract highs this week, but in the meantime old crop oilseed rape crush margins have been reduced to zero, however they remain encouraging for crushers on new crop.
The market remains extremely volatile, all due in part to the conditions we see in many parts of the oilseeds grain regions around the world, particularly in Western Europe.
- Slow pace for old crop trading
Trading in old crop beans remains remarkably sluggish. Values have not changed over the week and trades have been mainly limited to some short covering with no consumer interest. At current values, there is now little difference between old and new crop prices but, as most farmers do not want to carry stock, we are unlikely to see any market movement.
- New crop bean trades at a still
With continuing concerns over lack of moisture, no new crop bean trades have been reported. Growers are reluctant to commit to sales and buyers refuse to follow the volatile prices driven by the wheat market.
Pricing on farm for UK ammonium nitrate markets has remained static this week. Spot demand has been good considering the cold dry weather currently in the UK. Global urea values await the next Indian tender which is anticipated to be around early to mid-May, which could show some support for pricing. However, it is worth noting that North African urea free on board (FOB) values have drifted lower by some $40/t in the past three weeks so makes an increase look unlikely.
Phosphates remain stable and show no sign of a weakening for the short term. Potash levels also remain flat for the time of year. Suppliers are reluctant to buy new cargoes at current values, meaning supplies will remain tight for the remainder of spring.
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