- UK reliant on export bids
This week's market movements clearly highlighted the importance of exports for supporting new crop wheat prices. Huge devaluation of the pound this week saw the currency trade at a two-year low against the US dollar and euro, pushing the UK towards export parity. The result of this meant futures and physical prices rallied as small volumes of feed grade wheat began to trade out of the south of the country. November futures almost tested their recent upper limit of £150/t but the support was short-lived. The pound strengthened towards the second half of the week and all export bids dropped £2-3 which fed back to farm. In a marketplace with very limited domestic harvest demand and a 15 million tonne wheat crop on its way, there's no doubt the UK will be placing a greater reliance on exports to set the tone for pricing, which in turn means we are at the mercy of currency volatility short term.
- UK harvest underway
Early harvest results from the south of the country look encouraging and harvest is now one third complete in areas of Sussex, Kent and Hampshire. Excellent early quality was reported, with specific weights above 80kg and Hagbergs above 300. However, the forecasted unsettled weather is an increasing concern for ripe crops and uncertainty around this is supporting milling premiums. Capturing quality is key for maximising the volume of home grown wheat that our millers can use and competing in milling wheat markets outside of Europe. There is currently interest in the ports for UK quality wheat but, until crops are harvested and sampled, it appears sellers will be cautious about overcommitting wheat until quality is known.
Despite an unsettled week of weather across the country, the winter barley harvest is almost complete south of the M62. On the other hand, the Scottish harvest has just got underway. Strong export demand from the continent will exist until the end of October, whilst potential demand from beyond Europe will only surface later in the year, if at all. With this strong export demand in the short term barley has reduced its discount to wheat, particularly in the south where it has reached close to an £8 discount. This relatively low discount makes barley less competitive in compound rations and, if maintained for too long, will reduce long term demand – not a desired outcome with Brexit looming.
- Malting barley
Spring barley harvest in the south has started to gain momentum and, much like winter barley, yields are being reported as good. Quality reports have been positive with both Planet and Propino showing lower grain nitrogen results when compared with last year. An unsettled forecast is one to watch given its potentially negative impact on malting barley quality. However, the recent wet weather seen in the north of England has had a limited impact on crops that are not quite ready to be harvested.
Export demand to the EU (which is by far the most significant destination for UK malting barley exports) after the 31st of October does not exist as the Brexit risk continues to dominate the malting barley market.
- Global markets weak
This week has been tough for the oilseed rape market, with a resolution to the US and China trade dispute looking further away than ever. A number of confrontational tweets from U.S President Donald Trump made traders feel as though there was still no sight of a resolution, even after the recent three-month cooling off period since the last round of negotiations. This, coupled with an upgrade in expected US soybean yields from 46.3 bushels per acre to 46.6 bushels per acre (Planalytics), led Chicago soybean futures down by 5% over the past five days of trading.
- Smaller crop supports UK prices
UK oilseed rape markets have managed to buck the trend this week with physical prices up by £4 per tonne at the time of writing, despite reports that early yields along the south coast and in East Anglia are better than expected. Overall the crop is expected to be lower, though, after the well documented difficulties with flea beetle damage. According to the recent AHDB survey there is a drop in English plantings of 11%, giving us the lowest area since 2003.
- Pea prices
It is still early days but we have seen samples of peas from the south east. Early yield indications are good with some reports close to 5t/ha but quality is very variable. Some of the samples are bleached and have excessive insect damage, whilst others are showing a good strong green colour. Until we analyse more samples it's hard to value the pea crop but, initially, we expect values to range from £250-£275/t.
- Weather hampering bean yields
Early bean samples are variable and contain high numbers of very small beans which have died in the extreme heat from the past two weeks. We are expecting more mature crops to yield well over the coming days but changing weather may start to impact on the quality and increase staining. Values remain unchanged with feed beans around £200/t and human consumption premiums of £30-35/t.
- Nitrogen / Urea
The UK's nitrogen markets have seen increased activity this week as growers focus on risk management due to the changes in exchange rates and the risk of a no-deal Brexit. Mainland Europe remains at a premium to the current UK CF Fertilisers and Yara prices but, in terms of physical volumes, it still remains behind year on year. Urea prices are still positive globally; there is a continuation of demand from India and Brazil and the French alone still require approximately 1 million tonnes. Current exchange rates between the US dollar and sterling are adding upward pressure to our domestic prices.Growers are advised to look at cover on UK nitrogen as CF Fertilisers is only £5/t up on the starting price, compared to Europe which is up by £25/t. This difference is likely to narrow soon.
Most autumn tank fills are now committed and we advise that your spring volume be booked as soon as possible.
Muriate of Potash (MOP) prices moved up this week by £20/t (approx 8%) on the back of the sterling versus. US dollar exchange rates. With no UK MOP production, all product is now being imported. Diammonium Phosphate (DAP) and Triple Super Phosphate (TSP) prices also increased. We advise growers to prioritise ordering DAP for oilseed rape establishment to ensure a timely delivery. The rise that's taking effect on MOP will alter prices on PK and NPK blends. Please talk to your Frontier contact to discuss options and also make sure product is purchased ahead of any further changes in the exchange rates.
- NS grades
Growers are now making decisions to grow oilseed rape and therefore demand on NS grades are getting stronger. Frontier is offering the new CF Fertilisers compound, 'Sulphur Gold' 29N 20so3. Deliveries are available for October; call your Frontier contact to discuss.
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