- UK prices under further pressure
London futures fell a further £8/t this week on harvest news and the prospect of heavy imports in the coming months. Until recently, the UK was pricing at import parity in order to balance a tight supply situation and the weight of this is now being felt. Add to this the predictable pressure that comes with an early harvest and we are suddenly faced with delivered prices £15/t off recent highs. As well as this, we are seeing harvest discounts to forward positions widening as stocks compete for fixings straight off the combine. With prices losing ground it's tempting for those with grain to sell to hold back, but at current price levels wheat is still worth £40/t more than this time last year and that remains a sensible point to sell.
- Wheat markets slide off highs
Global markets continued to regress from recent highs as crop reports and harvest pressure set a more bearish tone. Despite the widely publicised wheat crop losses in the EU and Russia, there seems little need for panic around world feed-grain supply as US maize harvest begins. This week's US corn crop tour put projected yields up 5-10%, well above the five year average across most of the Midwest. The result of this was a slide in competing wheat prices in the US and the EU. CBOT futures lost £12/t over the week.
- Russian export cap
The market continues to monitor rumours that the Russian government will limit wheat exports to 30 million tonnes, 5 million short of the USDA's predicted 35 million. This comes following a push from the livestock sector which fears the 20% fall in wheat production this year will threaten animal feed supply. The result is a wave of farmers looking to market stocks ahead of any export cap. Combine this farmer selling with a weakening rouble and wheat continues to race out of the country. Exports already top 6.4 million tonnes, compared to 3.7 million tonnes last year. If this pace continues, we could see the much talked about cap reached by Christmas!
- Wet weather holds up harvest progress
Harvest of malting barley in Scotland has been disrupted by recent rains. Meanwhile, nearly all barley has now been cleared in the south of England. Southern yields have been variable but the general feeling is that yields are down on the five year average. A similar story is unfolding in Scotland, with yields down and significant variations in quality.
Scandinavian harvest is complete where spring crops have been badly affected by drought conditions. There are suggestions that yields could be down between 20% - 40%. There was a large carry of '17-'18 Scandinavian malting barley because of low prices in the spring and early summer. This means they still have quality barley available to blend. The next direction of premiums will depend on blending ability and whether the brewers announce a specification change.
- Domestic and export demand for feed barley
Domestic demand remains firm for feed barley as it holds its position in the animal feed ration alongside wheat and corn. Export demand is sporadic, with Tunisia asking for a tender of 50,000 tonnes of both wheat and feed barley earlier this week. Due to long holders in the Black Sea this is unlikely to come from Western Europe. However, others tenders are expected.
- Correction in the EU rapeseed market
This week has seen a sharp decrease in European rapeseed prices. This has been partly due to a correction in an overbought MATIF market, coupled with declining world oilseed prices.On Friday afternoon the MATIF rapeseed Nov'18 contract was down 10 euros on the week.
Towards the end of this week a weaker sterling value against the euro has helped to partially offset decreasing EU prices. With the perceived lack of US soybean supply to China there is more talk of Chinese demand for OSR and canola supporting markets.
In the oils market this week sunflower, rapeseed and soy oils have all been under pressure.
- Trade talks dominate soybean market
The annual US Pro Farmer crop tour is showing soybean pod counts up 8-12% year-on-year. This has prompted talk of further yield increases on an already significant crop forecast. Yield estimates are published on Friday night in the US.
The big market mover for oilseeds continues to be the US–China trade situation. The latest round of talks between the two has officially ended with nothing achieved except an 'exchange of views'. To combat the effects of these tariffs the USDA expects to unveil its farmer compensation scheme on Monday. This may include $1.65/bushel compensation for soybeans.
On the demand side, China has consumed most of the South American supply available to it. This raises the question of where they go next to fill the gap until the next South American harvest. The obvious option is the US but politics and tariffs are the blockers there and it won't be easy to sort out with both sides staying firm on negotiations. Further movements here will be closely watched by all in the trade.
South American soybeans are enjoying good weather and significant premiums over US beans, enabling flows into China. Because of this, the market expects a big seeding program in these areas. Therefore, 2019 could be a bumper supply year.
- Harvest almost complete in the UK
This week the feed bean market has weakened, although not to the same extent as wheat. This is probably due to the impact of the reduced yield seen in most areas that have finished harvest. To a certain extent this reduction will be offset by the lack human consumption exports this year due to very poor quality. In previous years the UK has exported between 2-300k tonnes of human consumption beans to Egypt and the Middle East. This is likely to be under 50k tonnes this year.
The next market move will be driven by the quality and yield of the last 20% of the UK harvest, as well as that of beans supplied by the Baltic states.
Another week with CF Fertilisers and Yara closing offers. In Europe, Yara pushed ammonium nitrate prices up for new orders by 23 euros and calcium ammonium nitrate by 17 euros.Yara immediately withdrew terms and CF Fertilisers followed on Wednesday. CF Fertilisers then issued new terms yesterday afternoon which shocked the trade with a £20/mt increase to the Nitram and Doubletop price for December delivery. This now puts Nitram at over £270/mt for December. Granular urea has also firmed again this week and currency is seriously hindering purchases of replacement stocks, pushing the price in UK terms even higher. Imported ammonium nitrate offers are also firmer with limited availability still the most significant issue.
With the higher UK price of nitrogen, more Imported ammonium nitrate could be a possibility. However, with higher prices in Europe compared to UK, European producers are more likely to send product locally than ship over here.
Currency is driving the market higher in the UK. Demand for TSP and DAP is forcing suppliers to replace stocks sooner than they expected which is pushing phosphate prices higher. Potash remains quiet in comparison but is expected to firm, along with TSP, shortly. Cleveland Potash is a supplier to the UK of MOP/TSP and PK compounds. The latest version is a 0.18.18 + 18S03 + calcium. This is made at the Amfert factory in Amsterdam using polysulphate in the mix to produce a true compound with P K SO3 and calcium. The potash, sulphur and calcium all come from the polysulphate which is mined in the North Yorkshire moors. Speak to your Frontier contact for more information.