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- Wheat prices under pressure
World wheat markets have fallen again this week and have now effectively lost all the price gains they made in 2021. London wheat futures fell to their lowest level since the 17th December. In January, fears that Russia would close the door on wheat exports saw Black Sea export prices soar to £300/t free on board (FOB), before including freight costs. Buyers are now harder to find and traders' offers were reported to have fallen to $250/t searching for demand. Prices have fallen sharply despite strong exports to date for the world's major producers. Weekly wheat export sales for the US were 344,000 tonnes, taking the season's total sold to almost 93% of the surplus estimated by the United States Department of Agriculture (USDA), which is just ahead of average at this time of year.
From this point, sales only need to average 80,000 tonnes per week to hit the estimate. US weekly corn sales included the 3.8 million tonnes that China bought last week, bringing the total sold to just over 4.6 million tonnes. Over 98% of the USDA's estimated surplus is sold, which is 25 points on the average at this time. If just 1% of last week's sales are made each week to the end of the season, the USDA target will be exceeded.
EU weekly wheat exports were also strong at 670,000 tonnes. This takes the total shipped to 19.34 million tonnes. The export pace over the past month has been up to 687,000 tonnes per week, which is 287,000 tonnes per week more than is needed to meet the recently revised Stratégie Grains target of 25.2 million tonnes for the season.
Last season, EU wheat shipments reached ten million tonnes between March 21st and 30th June, although the prevailing old crop prices were not at the same premium to new crop that they are today.
- Upbeat 2021 wheat production prospects weighs on prices
New crop wheat production prospects continue to improve, adding to the pressure we have seen on prices. The Institute for Agricultural Market Studies increased its Russian production estimate to 79.8 million tonnes up from its previous estimate of 78 million tonnes following a period of beneficial weather, particularly in the south of the country. US winter wheat crop ratings improved again with Kansas up to 45% from 35% last week, with crops now rated 'good' to 'excellent'. The significant rain and snow over the past couple of weeks has seen soil moisture levels increase significantly, reducing the areas that have been short on soil moisture from 47% two weeks ago to 17% today. Texas has the second highest winter wheat area ratings, which were up two points on the week to 29%, rated 'good' to 'excellent'. Oklahoma was up five points to 62%, also rated 'good' to 'excellent'.
- International Grains Council (IGC) sees bigger crops
Some of the negativity in US corn futures prices this week has come from private estimates which anticipate US farmers drilling an increased corn area this spring. The USDA will publish its estimates next week on 31st March. Meanwhile, the IGC published its 2021/22 world balance sheets this week, which sees world corn production rising by 54 million tonnes on the year to 1.193 billion tonnes. A significant percentage of this production originates from the US. The report also outlines significant increases in consumption, leaving corn stocks ten million tonnes down on the year overall.
2021-22 world wheat production is seen rising by 16 million tonnes on the year to a record 790 million tonnes. Most of this increase is due to high production levels in France and Argentina, although Argentinean farmers have recently indicated that they are likely to plant more barley instead of wheat this season.
Overall, world wheat stocks are seen rising by 12 million tonnes, which will offset the fall in corn stocks. However, beneficial weather in the coming weeks and months is key to ensure these higher production estimates can be realised.
- Freight rates stall exports beyond the EU
Feed barley prices in the UK stabilised this week after recent falls. Values have now dropped low enough to find a little more export business into mainland Europe for nearby delivery. Export opportunities from the UK to outside the EU have stalled as higher freight rates for larger size vessels have jumped dramatically in recent weeks. This is purely down to a shortage of available vessels. The demand into the EU has been a welcome opportunity as the window for UK exports draws to a close for another season. Growers with unsold parcels, particularly in the southeast, should look to take advantage in the rally of prices before the last vessels sail.
- Spot interest for UK compounders
As the Easter holiday approaches, there has been some spot interest for the UK compounders as feed orders have increased to cover the long weekend. With few first-hand farm sellers at the moment, traders have been encouraged to part with spot supplies through increases on prices paid. In the longer term, trade sellers in Yorkshire and Lincolnshire for May and June suggest there are adequate supplies of barley coming forward to see the domestic market through to summer.
- Good drilling progress in Europe
In the malting barley market, spring barley drilling in France is now complete and the UK has made good drilling progress this week. The malting barley market has drifted lower this week as a result of the good drilling progress made across Europe as a whole. With nearby rains on the UK weather radar, growers should think seriously about a marketing strategy for their spring barley, especially as demand continues to be uncertain as European lockdowns continue.
- Markets stabilise
Benchmark US soybeans prices on the futures market have appreciated by over 70% during a year which has seen a combination of several bullish factors. UK rapeseed prices have risen by almost £100/t over the same period but have drifted sideways since hitting season highs at the start of last week.
Progress has been made with the soybean harvest in Brazil this week due to better weather in South America, which is allowing the market to consider Brazilian exports alongside the usual US shipments. This has eased pressure on US futures markets. Now the market awaits to see if the US will respond to higher prices with an increase in soybean plantings while high corn prices will create competition against beans for US acreage this spring. The stocks and plantings report from the USDA to be released next Wednesday will reveal more.
- Tight stocks
Oilseeds availability from Ukraine and Canada, two early season suppliers, will be marginally down on the year. However, Australia is likely to increase its plantings. Nevertheless, estimates still anticipate the country's availability decreasing by around one million tonnes due to lower yields.
This may present a challenge for European buyers who have the same import requirements for oilseed rape as last season. A plentiful 2021 harvest is needed to offset the very low global oilseeds stocks the market is seeing at the end of 2020/21.
- An opportunity for harvest 2022
Most of the rapeseed crush activity in the UK is aimed at producing high quality oils for use in the food industry. However, a significant minority of the UK crop, usually around 5%, is grown specifically for industrial applications including for use as slip agents, lubricants and in printing inks. The varieties used in these processes are naturally high in erucic acid and the produce is commonly called HEAR rape. Demand is increasing for HEAR varieties due to its early vigour and establishment traits without a yield reduction. Frontier currently has contracts available for new growers for HEAR rape offering significant premiums, with no default, with both storage and harvest terms available. Please speak to your local farm trader or agronomist for more information.
- Old crop bean markets withering
Old crop bean markets continue to struggle to hold their value due to the price of other feed materials decreasing at speed. Additionally, a number of parcels from farm remain unsold. It seems there is little potential for an increase in ex farm values in the near future.
Pea markets have followed a similar pattern, seeing little demand due to cheaper alternative feedstuffs on the market and strong sterling impacting on export competitiveness.
- New crop pulses in good stead
With another week of reasonable weather across the UK, spring pulse plantings have continued at pace going into good seed beds. The UK is better positioned than at this time last year and, with some premium over wheat futures contracts still available, it looks set to be a good season for bean growers.
It is very likely that India will agree on the latest RCF tender for around one million tonnes of granular urea for shipment in April 2021. Prices are around $380/t depending on location and freight rates. Freight costs have rocketed in the last few months due to ship demand, frozen ports and higher fuel costs. This purchase will have very little effect on UK granular urea prices but may well hold off any talk of new season offers for the next couple of months. Ammonia prices have once again jumped in the US but that will have more effect on next season's pricing than for this spring. Ammonium nitrate supply is still tight as we enter the second and third application windows. Imported ammonium nitrate stocks are unknown in the UK with limited new offers until the second half of April. With Easter fast approaching, let's hope that if demand comes the fertiliser isn't waiting in the queue at the Suez Canal!
Phosphates have again moved upwards as replacement stock values firm. Blenders are keeping a close eye on current stock levels. Prices have hit new highs as a result of later demand from the UK due to poor weather and delayed plantings.
TSP and DAP values are up by around £20/t since last week. These higher prices are expected to last for the next few months.
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