- Ensus announcement weighs on prices in the North
On Monday, CropEnergies announced that their Ensus bioethanol plant in Teeside would pause production from the end of November "due to the difficult market conditions". With the plant having historically used a combination of both wheat and maize the news came as a shock to the UK grain trade, raising further questions over demand for UK feed wheat.
On the back of the announcement, markets traded sharply lower and continued to lose ground nationally over the week. May'19 futures lost close to £7 in total.
In the North, cash feed wheat prices continue to slide with an increasing volume of farm grain travelling further to consumer homes. Frontier has direct access to several key feed wheat homes in this area - please speak to your farm trader to discuss marketing options on pool and flat prices.
- UK wheat supply and demand looking more balanced
Monday's announcement was the latest in a long line of impactful closures to UK consumer homes. As a result, we could see a re-balancing of UK supply and demand, whereby lower demand offsets the sub-14 million tonne wheat crop and early-season imports. The result would be an increase in end of season stocks, which could either be carried into the 2019 season or exported as surplus.
Currently, UK wheat isn't competitive to export so we could see further downside before this comes into play. However, there will also come a point where consumers step in and take cover. Until then, it's difficult to pinpoint where domestic prices will find support.
- Global markets weaker
US wheat and corn prices mimicked global stocks and oil markets this week by steadily trading lower. Export figures remain 17% below last year and, until the pace of competing with Russia's exports slows, it seems likely the US will remain over-priced. In the meantime, the planting campaign for next year's crop is surging ahead at 65% complete versus 58% last year.
Conversely, there was one area of support which came from the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES). Their crop production report put total grain production in the East 53% lower than the 20-year average.Bigger crops are expected in the West but the trade now anticipates a 16.5 million tonne wheat crop, which is two million tonnes below the latest USDA figure.
- Feed barley values supported by export values
This week, feed barley tenders to both Tunisia and Jordan helped to support UK barley prices as wheat values declined. The export market looks like it is becoming a big boat/deep-water port scenario going forward as the coaster trade stalls.
Practically, this has meant rising prices in the south of England. This is where the bulk of the deep-water ports exist and the area has the smallest amount of domestic demand. Values further north and into Scotland were already ahead of export values, meaning little change there this week. At the moment, new domestic demand for feed barley is limited as compounders wait for winter to kick in and most have a reasonable amount of cover up to the end of the year.
- Malting barley trade relatively quiet
With limited trade opportunities this week, the malting barley market has remained quietly firm. With tight EU supply and demand, premiums for malting barley remain good. With many mixed quality spring barley parcels still on farm, focus has and will remain on the execution of contracts. As more farm barley is moved over the next few months, the picture of what growers have in terms of both yield and quality will become clearer.
UK domestic buyers appear well covered for now up to the end of the year but gaps do still exist for January to March. In particular, low nitrogen spring parcels seem to be in demand whenever they come to the market.
- Domestic OSR prices remain well supported.
Good crush demand and weaker sterling has meant that UK values have remained resilient in the face of declining prices in oilseed markets.
- Global crop progress
After some tough weather conditions throughout late September and early October, Canadian farmers have managed to get back into the field and re-start the canola harvest.
Australia has seen some rain in regions where the crop is still growing and harvest has started in some early areas of Western Australia.
- European markets
Prices fell this week as Paris MATIF futures moved lower, combined with the sell-off in US soybeans and canola. The weather remains a concern on the growing crop and new crop values are currently well supported.
- Feed bean prices slip
For the first time this season we are in a spell where, after a good bull run, UK pea and bean prices are showing signs of wanting to pause for breath. While better quality beans are holding their value, we have seen feed beans slip back by £2-£3 per tonne this week as cereal markets come under pressure and the first pea cargoes from Eastern Europe start to arrive.
- Quality markets holding up
In the UK this year, bean quality has tended to improve the further north you go and, in a tight supply situation, we have seen the human consumption market appreciate by over £50 per tonne in the space of a few weeks. However, Egypt – the key market – is currently receiving some early Baltic shipments and high prices are likely to cause some of the demand to switch to lentils and other alternatives. The timing of sales will be crucial and high levels are now feeling a bit vulnerable.
The UK nitrogen market has moved again today. CF Fertilisers and Yara have either withdrawn terms or moved the price higher this week. Yara moved the European AN price upwards by 10 euros and CF Fertilisers have today withdrawn current offers. We will have to wait to see what CF Fertilisers do next but it's unlikely the price will fall.
European producers have been meeting at a major fertiliser conference in Greece this week. As a result, there are many rumours circulating that prices need to move higher on the back of higher energy costs and a lack of supply vs. increased demand for AN.
The urea market has been less activity this week but, in the short term (Q4-Q1 2019), we are still expecting more upside than downside. With only a few weeks until Christmas, most new shipments of urea will need to be arranged soon and there is very little talk of new product on the horizon.
With the good weather remaining, more PKs have been supplied again this week as many farms look for jobs prior to the winter. An increase in demand for PKs and TSP/MOP has meant that some blenders have had to replace cargoes sooner than expected, pushing prices higher. Greater replacement costs of MOP/TSP will be felt in the UK sooner than normal due to the open, dry autumn.
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