- Markets treading water
Wheat markets have moved sideways this week, lacking any fresh news. They are supported by the strong EU and Black Sea export pace, as well as mixed fortunes for winter drilling. By the end of last week, this season's EU wheat exports had exceeded 8 million tonnes, compared to 5.7 million tonnes this time last year. Recent tenders for Turkey, Saudi Arabia and Algeria should maintain this strong shipping pace for the time being.
Russia has enjoyed favourable winter drilling conditions this autumn and up to the 23rd October was reported to have sown 17.6 million hectares. It is thought that total planting could reach 19.2 million hectares, which would be the most ever achieved. Of this, wheat would account for over 90% and recent rain and warm weather is seen as beneficial for crop development. In complete contrast, France and the UK continue to experience rain that is preventing farmers from planting winter wheat. To the 21st October, data produced by FranceAgriMer saw only 29% of the French wheat crop planted, up from 21% last week. This is still well below the 50% planted at this time last year. It is likely that UK farmers are further behind and London wheat futures have reacted accordingly. Old crop remains mostly unchanged but the November 2020 position has risen by £2 per tonne during the week.
- World corn and wheat production seen lower
The International Grains Council published its latest world supply and demand estimates this week, making small cuts to production and stocks for wheat and corn. Reflecting the adverse dry weather that has been impacting on Southern Hemisphere crops, it reduced Australian wheat production to 17.1 million tonnes from the previous 19 million tonnes. This is still above other estimates as low as 15.5 million tonnes. Argentina was trimmed from 20.4 to 19.5 million tonnes and overall world production is down 2 million tonnes to 762 million tonnes which is still a record high.
The corn balance sheet revisions were minimal, with world production down just 1 million tonnes to 1.098 billion tonnes. Within that, Argentina was cut 3 million tonnes to 53.1 million tonnes, compared to last year's 57 million tonnes. Conversely, favourable growing conditions in China have seen its corn crop estimate increased to 255.5 million tonnes. Year-on-year, world corn production is 30 million tonnes lower.
- Barley trade quiet as Brexit deadline approaches
Brexit uncertainty continues to frustrate the UK barley market, with little new trade being seen. This lack of activity has not been helped by the trade focus on execution of feed and malting barley exports, or the farm focus on drilling winter crops when possible. Feed barley values have firmed slightly in nearby positions, as shippers look to cover business that is already on the books. We do see occasional export interest for markets outside the EU. Domestic values are influenced to some extent by wheat values and some firming of wheat futures this week have helped in this respect.
- Malting premiums remain modest
With an exportable surplus of spring barley in the UK and no prospect of new export business until we see a resolution of the Brexit situation, premiums for malting barley are difficult to find. Sporadic trades of UK domestic barley do take place but buyers only step in when they have new malt sales to cover or need specific varieties or quality barley they do not already have. Premiums remain modest as a result. However, a firming of the feed barley base should help malting prices upward at these low premiums we see today.
- Falling UK market
Domestic markets have drifted a little lower this week and are now trading at £20 per tonne below this month's highs. Much of this can be attributed to the strength of sterling, but there are a number of bearish factors beyond the UK which are pressurising prices.
- Cheap alternatives
European markets have been under pressure this month as demand for rapeseed oil is threatened by competition from sunflower seed oil – a cheaper alternative. Sunflower seed crops in Russia and Ukraine have been huge this year, pushing Russian markets down to 5-year lows. Fund managers are also viewing French rapeseed futures as being overvalued compared to Chicago soybeans, leading traders to buy the soybeans and sell the rapeseed futures. A strong euro against the US dollar is also not helping this equation.
- Canadian imports
Europe looks set to import a record tonnage of Canadian canola during the 2019/20 season. Harvest had been halted in Manitoba and Alberta due to snow but, recently, good progress has been made with the overall Canadian harvest now well into its second half. Farmers have been ready sellers when the crop is in the barn, driving local prices lower. The traditional trade route to China remains problematic for Canadian traders and Europe is an obvious target given its sharp reduction in production from the 2019 harvest.
- Old crop bean values fall
Old crop bean values are falling due to the lack of vessels loading existing contracts, as well as the lack of buyers in further forward positions. Sterling will always be a driver in this export-led year and, as it is purely following UK political events, the market will remain volatile. The values of human consumption beans are also under pressure, despite the lack of good low bruchid beans. In Egypt, the first cargos of Lithuanian beans have arrived and these are far superior in quality compared to UK this year. It will be at least two months before we see an increase in demand for UK colour sorted beans.
- Consider marketing your 2020 beans now
New crop bean plantings are likely to be higher again due to the problems surrounding the planting of other winter crops. Given this increase in overall tonnage, it is a good time to consider marketing 2020 beans, either on the Frontier bean pool or through our current buy-back offer. Please contact your Frontier farm trader for more details.
It has been a good week, with drills progressing across the UK. Some areas now have 60% of winter cereals sown, whilst others are closer to 10%. Demand for fertilisers is higher in the south of the country compared to the north, with most growers watching the weather and Brexit developments before deciding their next move. Currency is rapidly fluctuating depending on the news from Westminster. Trying to guess the next move is near impossible and, whilst Brexit has held business back, weather is the main driver today.
UK ammonium nitrate prices are unchanged this week, with CF Fertilisers contemplating the next move. The urea market remains quiet, with UK shippers nervous about committing to the next purchase without knowing what impact Brexit or currency changes will have at the end of October.
The PKs share a similar story, as they are currently low in demand. There have been no changes following the annual Argus Europe Fertilizer conference in Malta last week. Producers are well aware of the current weather situation in the UK and throughout Europe. This temporary lack of interest is holding the market back, whilst currency is driving it. Combined with Brexit concerns, this is leading to high stocks and a slowdown of fresh imports. As a result, regional offers are available so get in touch with your local Frontier contact for actual levels.
Alongside its divisions, SOYL and Kings, Frontier is hosting a series of 17 winter training events. Open to all farmers interested in learning more about the use of digital technology to improve crop production performance, the events will include valuable insight into MyFarm and its role as a complete farm management platform.
You can find your local event and book your place by visiting our website.