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World wheat markets have come under further selling pressure this week, with little to no fresh bullish features to be seen.
Whilst demand slows, an improvement in the weather and crop ratings has encouraged speculative funds to build on their short positions in agricultural markets.
Despite recent missile attacks on the Port of Odesa earlier in the week, US traders carried their short book of over 100,000 contracts into the Thanksgiving holiday weekend. They took comfort in the knowledge that the US corn harvest is drawing to a safe conclusion - 93% completed, two points ahead of the five-year average.
US winter wheat drilling is also nearly done, with 95% complete. The crop is in relatively good order, with 48% classed as being in 'good/excellent' condition. This is well ahead of this time last year, when 32% of the crop suffered from extensive drought.
Chicago Board of Trade (CBOT) wheat futures dropped to levels near to their contract lows and which were generally prevailing two years ago.
Last week, the French Farm Ministry published its latest planting data highlighting the challenges that the prolonged wet weather has given French farmers. Just 71% of the country's winter wheat had been sown by 13th November, compared to the 96% last year.
The prospects of a tighter 2024/25 EU balance sheet had offered EU wheat prices some element of support. However, the settled drier spell now forecast is seen as an opportunity for farmers to catch up with their winter wheat drilling programme, leaving fewer concerns for next season's output.
Onto exports, this season's slow progress was again highlighted by the latest official data from Brussels, showing shipments at 11.592 million tonnes which is 19% down on last year. This has encouraged additional selling on Paris wheat futures and managed money traders have built a record short position.
Importantly though, the slow pace may be understated as the overall situation is more encouraging for sales of the EU wheat surplus. The Brussels data regarding Bulgaria, for example, has not been updated since the middle of September and states that 937,000 tonnes has been shipped, while data from the Bulgarian Ministry of Agriculture, Food and Forests shows wheat exports for the season reached three million tonnes by early November. If correct, this alone would close the gap on last year to just 700,000 tonnes, which is less than the EU shipped last week.
It was also speculated that French wheat sales due for shipment to China in November and December will have to be postponed until next February and March. This not only leaves export facilities choked with wheat, but also suggests that China is unlikely to make any fresh purchases in the new year.
Feed wheat supplies from Ukraine, France, Denmark, Poland and other EU origins continue to be offered cheaply into traditional UK feed wheat export homes.
This is leaving UK supplies uncompetitive and fresh export business non-existent. It's likely that by the end of December, the UK will have shipped little more than 120,000 tonnes. Even when accounting for a significant carry over into next season, this leaves at least half a million tonnes remaining.
An additional challenge for the UK balance sheet is the reduced value in ethanol production, as it could mean the wheat volumes required for this sector slow down significantly from next month. With no export and falling domestic demand, placing feed wheat in the near term is very difficult and leaves spot trades at significant discounts to forward futures values.
Looking at UK weather, a more settled forecast should encourage a return to winter drilling and in turn give a boost to 2024 production expectations. However, if next year's crop is short, then UK feed wheat prices might trade at import parity prices and encourage a high commercial carry over of 2023 wheat. Without that feed wheat price, prospects remain challenging.
UK feed barley prices continued to come under pressure this week, with the UK still having a sizeable exportable surplus to trade but remaining uncompetitive on export sales.
Feed barley is priced at a considerable discount to feed wheat and therefore inclusion in domestic rations is already close to the maximum levels.
It has been a quiet week in the malting barley market, with little trade throughout Europe. Premiums for the crop remain attractive, with relatively tight European spring malting barley supply and demand.
In the UK, questions are still centred around how much surplus crop will be suitable for malting once it is delivered following issues with germination and pre-germination. There is also uncertainty around demand, especially in the brewing sector. If you have malting barley still on farm, prioritise cooling and try to monitor your bulks regularly to make sure that quality is not deteriorating.
Looking ahead to new crop, the UK looks set to have a large increase of spring barley in all localities. While the extent of this larger crop area remains unclear for now, it does mean crop '24 malting barley premiums risk being put under pressure and buyers are understandably reluctant to enter the market.Having a marketing strategy for your spring barley crop is more important this year than ever. Frontier offers a range of marketing tools to help you market your crop and manage risk, including guaranteed minimum premium contracts and wheat futures related contracts, as well as feed and malting barley pools. Information about these risk management solutions can be found on the Frontier website.
During the past week, price movement for oilseeds has largely been focused on South American soy production and politics – with a spotlight on Brazil in particular.
Current estimates suggest that the South American crop will yield over 225 million tonnes. If this materialises this will be a record amount - even if Brazil loses 25 million tonnes from its initial estimates.
The future of Argentinian agriculture has also been brought to the fore this week as the country's newly elected president, Javier Milei, looks to 'dollarise' the country's market, boost port revenue and trim rampant inflation in the country.
For rapeseed, prices remain relatively unchanged this week as the market struggles to track gains in soy due to rapeseed's independently heavier supply. Farmer selling across Europe remains behind an average pace.Whilst the trade waits for Australian rapeseed volumes to come into the market, crushers have had to pay higher levels for their seed to add some security to their early 2024 supply – trimming historically large carries in the market.
This week, the bean market slowed down on both the farm and consumer side.
Nearby values have fallen as most of the demand until Christmas has been satisfied. Instead, feed compounders are now concentrating on requirements post-Christmas and this will support values into the new year.
Heading into 2024, the overall market outlook remains positive with continuing strong domestic demand and no price competition from other mid-range proteins at the moment.
For exports, there has been no change in the markets following little to no demand given UK beans remain uncompetitive.
Worldwide urea values have softened again slightly due to a lack of demand coupled with current exchange rates making imports a cheaper option. Continued challenges from poor weather in the UK, Europe and beyond are also causing a lack of buying.
However, it's thought that the dip will be short-lived and once demand picks up, prices are expected to increase alongside.
A new Indian tender is expected soon, although no date has been announced thus far. China has placed a 60-day export ban mainly affecting urea and phosphates, which will inevitably have an impact on the market though the extent is currently unknown.
We have seen global purchases of granular urea in decent quantities, albeit at a slight price reduction to previous weeks.
Given the reasonably warm weather for this time of year, the price of gas remains steady with decent stocks in the UK and Europe for now. These will begin to deplete as the weather undoubtedly gets colder though and at that point the picture will certainly change.
It is still being reported that nitrogen-producing plants across Europe will soon curtail production or close indefinitely. This is due to low demand and high production costs, meaning that imported nitrogen options to the UK could be limited.
The delayed buying from the UK market points towards a tight spring, with suppliers not currently wanting to overstock until demand picks up. This could mean that we see periods of unavailable nitrogen products due to delayed vessel arrivals. The CF Nitram offer remains good value for the spring delivery period and is a UK manufactured, quality product.
UAN pricing offered into the UK market continues to be competitive, with solid alternatives on a cost per hectare basis for both tank fill and spring delivery.
If you have pre-Christmas tank capacity, you can still take advantage of product for autumn delivery and should discuss the terms available.
The recent introduction of the urea stewardship scheme means that after 1st April 2024, all liquid fertiliser applications in England will require the inclusion of an urease inhibitor such as Limus Perform. The benefits of including this product in UAN applications include improved nitrogen use efficiency (NUE) of up to 7% by reducing ammonia emissions by up to 98%.
Values for TSP, MOP and DAP remain unchanged again this week, but this does not currently reflect replacement costs for the UK. Once UK stocks are depleted, we could see further increases in these raw materials.
Looking ahead, the phosphate market looks particularly firm on the back of increased ammonia pricing, factories being mothballed, the conflict in Israel and the ongoing Russian sanctions. With this in mind, it's worth taking advantage of these firm prices for pre-Christmas delivery.
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