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- Global round-up
In a trading week that was shorter than usual due to Thanksgiving, there has been little fresh wheat news. Instead, markets have been buoyed by China's continued purchasing of US corn. With another 200,000 tonnes purchased last week, the market continues to predict China's overall demand. The United States Department of Agriculture (USDA) has estimated it will reach 7.2 million tonnes while other private analysts are estimating that China will tender up to 30 million tones of US corn. Either way, it is creating uncertainty in markets, which is a supportive factor for old crop. As a result, Chicago wheat lifted to its highest intra-day close for four weeks on Tuesday, fueled further by a 30-month low in the value of the dollar and poorer-than -expected winter wheat crop ratings.
The imminent Australian wheat harvest looks promising, with some crop estimates tipping over the 30-million-tonne mark, compared to 15 million tonnes in 2019. With ports stacked out for the next few months, it looks like Australian wheat exports will be a feature into Asian markets for the remainder of this season. Russia will need to compete into these markets, meaning even with winter crop ratings well below recent years, the realisation of a huge Australian crop could cause downward price pressure throughout the EU as well as Russia.
- UK summary
For old crop, currency and a tight UK balance sheet continue to be the main factors of concern, with ex-farm prices showing little movement in either direction this week. The next few weeks could prove pivotal, with volatile currency expected to remain a feature until Brexit negotiations conclude.
A firmer pound would make imported wheat more competitive and weigh on domestic prices. As Thursday's figures from the Agriculture and Horticulture Development Board (AHDB) reiterated, the UK needs to import 2.2 million tonnes to balance this year's books. To date. 1-1.2 million tonnes are estimated to have already been received.
Consumers continue to pick off cover for the remainder of this crop year, but it's clear the restoration of full confidence in any sector is yet to be seen following the outbreak of Covid-19. It now feels as though the market is waiting for a fresh demand-driver to move prices, but it's unclear at this stage where this might come from.
Confidence continues to build around new crop plantings, helped along by a week of better weather. With UK prices at around a £13/t discount to French prices, the market is gearing up for an exportable surplus. UK consumers who switched to cheap maize this year are beginning to show a renewed interest in wheat for the 2021/22 season.
- Consistent marketing results with Frontier pools
The Frontier pools have a strong track record of delivering consistent results for growers across all commodities.
Now two-thirds of the way through the 2020 marketing year, we are at the stage where our October-December pools are being finalised and 40-50% of the January to March and April to June pools are still to market.
The 2020 crop year has already shown a range in wheat prices of over £55/t. The unpredictable nature of 2020 looks set to continue into 2021, with the political and economic uncertainty that Brexit and Covid-19 continue to cause, as well as fundamental market dynamics of supply and demand, both in the UK and globally.
Harvest 2021 will see a return to a domestic wheat surplus, meaning exports will be active again. With wheat still being planted in the UK, this will have an effect on the planted area of other crops such as spring barley, beans, oats, and other niche combinable crops.
Having an insight into these cropping areas across the country allows our pool marketing team to make good marketing decisions on your behalf and removes the emotive selling of trying to hit the top of the market – rarely achieved by anyone.
- 2021/22 pools now open
The 2021/22 pools are now open and, with the outlook for further market uncertainty, committing a proportion of your growing crop to the Frontier pools represents a secure marketing approach.
For more information, visit www.frontierag.co.uk/pools or speak to your farm trader.
- Domestic demand a priority
The feed barley market in the UK this week has been all about domestic demand. Consumers are covering December requirements in some volume, which just goes to show how competitively priced UK feed barley remains.
Forward buyers for January onwards are still to be found in the marketplace most days; these represent both trade shorts and new demand from consumers who are making forward feed sales.
The AHDB released its latest supply and demand figures this week. The most notable change since its last update was the reported increase of UK domestic feed barley demand of 583,000 tonnes to a new total of 4.725 million tonnes – the highest level in over 20 years.
- Turkey and Tunisia buy from Black Sea origins
The world barley market has seen activity this week, with a tender of 75,000 tonnes being made by Tunisia and a tender of 155,000 tonnes being made by Turkey. The majority of these sales should be filled from the Black Sea region.
UK barley is almost competitive on the world market; however, the value of sterling, which strengthened at the end of the week, puts the UK at a slight disadvantage. Execution of existing export sales from the UK is of high importance to the trade, as vessels continue to arrive along the length of the south and east coasts of the UK.
The UK malting barley market remains muted as brewers and maltsters continue to wrestle with the uncertainty that the coronavirus pandemic and related lockdown has created.
Looking forward to next season, Frontier has a range of spring barley contracts available for those growers looking to drill malting barley varieties in the spring. Please speak to your farm representative for details.
- UK rape prices close to season's high
Prices in all major global oilseeds markets are usually interlinked, given that one type of oil can often substitute another. Because of this, the US soybean market is often regarded as the benchmark against which many other oilseed markets are valued, as soybeans are the most traded commodity in global oilseeds markets.
Therefore, it is a positive sign that on Monday, Chicago soybean futures found a new contract high after a 40% price rally which has spanned the past six months. Since then, markets have taken a bit of a breather, but domestic rape prices still remain close to the highest levels seen for the 2020 crop.
- Spring crops need rain in South America
Recent talk of cancelled Chinese orders for US beans spooked markets after Monday's high point and it was rumoured that some contracts were being switched from US origin to Brazilian. However, there would need to be a significant change in South American weather conditions before these reports would gain any long-term credibility amongst traders. At a critical time for South American crop development, Argentina remains too dry and a weather report from Brazil is describing its current situation as 'the worst performing monsoonal rainfall for over 40 years'. Until we have more confidence in those developing crops, it is difficult to see where any selling pressure might come from given the tight position on global oilseeds stocks.
- Market anticipates post-Brexit currency fluctuations
Pulse markets remain quiet with the next directional move likely to be caused by currency fluctuations following any Brexit deal fallout. Direct impact on pulse values from a no-deal scenario will be limited, as the import tariff for European buyers for dried pulses is only 3.2% and there is no duty for exports outside the EU.
- Australian bean prices fall after a bumper harvest
With the Australian bean harvest now well underway, it is becoming more apparent that it is a huge crop and, following large crops in wheat, barley and canola, there is limited silo space to store beans, resulting in tumbling prices this week.
Egyptian buyers are now able to secure beans at $30/t less than last week, making imported top quality Australian beans cheaper than UK feed beans. With Sudan exports limited to shipment by mid-December, there are now no premiums available for human consumption beans.
This week has seen another increase in global urea values due to tightening supplies stemming from production issues in China. North African sellers have capitalised, increasing values by $20/t.
This is being reflected in an increase in urea and ammonium nitrate pricing within Europe and the UK. This week, CF Fertilisers has withdrawn its offers and is contemplating its next move. Yara and importers have yet to show their hand.
It is also worth noting that there is a shortage of calcium sulphate within Europe, leading to tight supplies and, in some cases, a complete absence of supplies for making grades of nitrogen sulphur and NPK grades. For this reason alone, getting product ordered and delivered sooner rather than later to avoid disappointment come spring is highly recommended, especially given the amount of nitrogen sulphur still to be delivered to farm.
Potash prices remain flat while phosphates continue to increase in value, with DAP trading at 12-month highs. Suppliers have reflected these increases in offers to the trade. Advice remains to place orders pre-Christmas.
There is yet to be news of a deal on Brexit and what impact this will have on the industry, but currency markets look favourable to a positive outcome, providing hope that the agricultural industry will not be hit with further costs through additional tariffs.
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