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- USDA halts falling wheat prices
On Wednesday 31ST March, the United States Department of Agriculture (USDA) published its quarterly US stock and acreage report. It contained bullish data for corn that triggered a sharp price rally for Chicago Board of Trade (CBOT) corn futures, sending them to new contract highs; the highest level seen since 2013. Despite the report having bearish wheat data, wheat futures followed corn futures higher, ending the recent slide in prices that had dropped to a three-month low prior to the report.
In recent weeks, analysts have been very upbeat about US famers reacting to high corn prices and significantly increasing the corn area they plant this spring. Estimates have been as high as 94 million acres compared to 90.8 million acres last year. At its Outlook Forum in February, the USDA saw US farmers planting 92 million acres of corn. Average trade guesses before the report were 93.28 million acres. However, in the report, the USDA has revised its estimate with only a small increase on the year, bringing the new predicted acreage to 91.144 million acres. Using trend line yield data, this would leave 2021 US production short of expected domestic and export demand, cutting stocks and leaving a bullish outlook. US quarterly corn stocks estimates were also bullish, seen at 7.701 billion bushels, which is below average trade guesses and down 3% on the year.
In contrast to corn, the USDA now sees a larger US wheat area than it had previously estimated with the increase primarily in winter wheat. Average trade guesses were just below 45 million acres, which is similar to the figure estimated by the USDA at its Outlook Forum back in February. However, the USDA now sees the wheat area rising to 46.358 million acres, which is more than two million acres above last year's planted area. Wheat stocks, which are seen at 1.314 billion bushels, were 7% down on last year but still above trade estimates.
- Poor demand and weather sink wheat prices
Prior to the USDA report, world wheat futures markets extended their downward trend, taking prices to levels not seen since December. A lack of fresh old crop demand combined with improving 2021 Northern Hemisphere wheat production prospects has continued to weigh on prices. Black Sea markets are particularly weak with Ukraine export offers just above $250/t and at their lowest for five months, now searching for demand. The Ukraine export pace to date has been strong, reaching 14.22 million tonnes, which is 81% of the government's 17.5-million-tonne quota. However, an official this week said the slow-down in demand will see the season's total shipments fall short of the quota by 500,000 tonnes, even with three months to go. Ukraine new crop winter wheat prospects are encouraging, with 98% reported to be in good condition following a kind winter and recent beneficial weather conditions. Increasing soil moistures in the US have also proved helpful for the primary winter wheat producing state, Kansas. Weekly crop conditions jumped five points to 50%, rated 'good' to 'excellent'. French winter wheat condition remained unchanged on the week with 87% rated 'good' to 'excellent', which is well ahead of the 63% that received the same rating this time last year.
- Compound demand for feed barley set to fall
Interest in old crop feed barley has now become very sporadic. Lack of any export interest has been the feature of this week's trade. As the UK weather improves, livestock turnout will gather pace and reduce compound demand for feed barley further. Furthermore, supply of feed barley is now fairly tight in some parts of the UK. Regional prices do vary widely as longer hauls to deficit areas of the country become the norm until harvest.
- Increase in pace of new crop barley sales
New crop barley values have steadily fallen this week with good new crop prospects. However, the discount of barley to wheat has narrowed as lack of farmer selling has seen merchants reluctant to follow wheat values downward. The pace of new crop barley selling was seen to increase towards the end of the week as spring drilling came to completion in many areas and spring crops appeared above ground.
- Corn prices reignited by USDA report
The beginning of the week saw some export interest in feed barley from the UK as prices declined. Yesterday's USDA report has reignited corn prices, which should lend support to world barley values. In theory, this should halt the recent feed barley price decline.
- Volatile domestic market
March has been a volatile month for domestic rapeseed prices with a £30/t trading range on old crop markets but prices ending the month within a few pounds of where they started on March 1st. New crop prices have risen by £10/t over the course of the month but are currently £10/t lower than they were a week ago. This mirrors the recent sentiment in oilseeds markets with some of the pressure relieved by better weather in South America, a slowing down in the pace of US soybean exports and news from China which includes reduced demand due to swine fever and government directives to reduce the amount of soybean meal and corn used in pig rations. There has also been some feeling that the USDA would manage to 'find' additional US soybean stocks when its March stocks and plantings report came out in order to make sense of the high crush and export numbers that have been reported in recent months.
- Market feels impact of USDA data
There is always considerable interest paid to the March stocks and plantings report. The market reaction to the report is determined not so much by the numbers themselves but by any surprises that are revealed. What is known or expected has already been discounted into prices but over the years there have been some reports that have delivered significant shocks to markets. In the past 14 years, with the exception of last year, this report has triggered at least a 2% move in corn or soybean prices on its release. In 2013, for example, prices rallied hard on the unexpected news that stocks had fallen by 27% but bean plantings were predicted to be largely unchanged.
This year's report was released at 5.00pm yesterday, 31st March, and it didn't disappoint. Old crop soybean stocks were marked higher but given the export volumes already committed and the current pace of domestic crushing, this seems barely enough to ensure that the US will have even the minimum 'pipeline' stocks to cover the transition from this crop season into the next. However, the bombshell news was found in the planting numbers. The USDA's last projection for soybean plantings was 90.1 million acres and pre-report trade estimates ranged from 88.9 to 91.3 million acres. However, the report came in at 87.6 million acres.
This figure is still well up on the 83.1 million acres sown for last harvest but it was well short of expectations and, even using the USDA's near-record yield forecast, total production looks set to fall short of total demand. This implies stock levels being on bare boards at both the start and end of 2021/22. This is a projected situation that has never been seen before and Chicago soybean futures were soon trading at limit up. April could be an interesting month.
- Lack of demand for old crop beans creates price drop
In line with other commodities old crop beans have almost ceased trading and, with no demand, it's very difficult to accurately assess values. Current indications are around £210/t for May or June, down around £10/t over the week. Given this lack of demand, we would expect to see similar falls over the next few weeks.
- New crop values under pressure
New crop values are also under pressure with values now being below £200/t ex farm. In light of this drop in values, very few parcels are trading. As ever, the next move depends on new crop wheat values as well as growing crop conditions over the coming weeks.
India has agreed a tender for approximately 800,000 tonnes of urea. This is a lower tonnage than expected, but this is due to prices being $90/t higher than in India's last tender in December 2020. The majority of product will be prilled urea from China.
Global urea prices remain stable at approximately $390/t. Pressure on available tonnage is evident, with North Africa only offering limited May volumes, leaving no sign of any traditional reset in prices as yet.
Good weather in the UK has seen demand increase for nitrogen as we head towards Easter with no price changes from CF Fertilisers. However, Yara has followed the firm European markets and has slightly increased its prices as we move into April.
Ammonia prices remain firm and supply of ammonium nitrate in Europe continues to be tight. Growers are advised to look at the balance of nitrogen that is required to ensure deliveries are received in time.
Phosphates (TSP/ DAP/MAP) are still very firm with further price increases in the UK. Demand from South America is very strong which will hold up prices and potentially generate further increases over the next few weeks. Please discuss your requirements for TSP and DAP with your Frontier contact ahead of any future price rises.
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