Late on Wednesday afternoon this week, the United States Department of Agriculture (USDA) published its quarterly US grains Productions and Stocks Report and final 2020 US wheat production estimates. This is a quarterly report which often passes without much attention. Yet, the results of this report triggered a significant price rally for the world's grain and oilseeds markets. Supportive data was perhaps expected but not to the extent revealed.

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WHEAT

  • USDA ignites grain markets

Late on Wednesday afternoon this week, the United States Department of Agriculture (USDA) published its quarterly US grains Productions and Stocks Report and final 2020 US wheat production estimates. This is a quarterly report which often passes without much attention. Yet, the results of this report triggered a significant price rally for the world's grain and oilseeds markets. Supportive data was perhaps expected but not to the extent revealed.

Traders were shocked by USDA estimates that placed US wheat and corn stocks well below expected volumes. At 50.7 million tonnes, corn stocks were 6.5 million tonnes below average trader estimates and 5.8 million tonnes below this time last year. At 58.7 million tonnes, wheat was three million tonnes below expectations and five million tonnes lower than this time last year. At 49.7 million tonnes, US wheat availability for 2020 showed cuts of a further 300,000 tonnes from previous estimates.

Chicago Board of Trade (CBOT) wheat futures added over 6% to their value in a short time, climbing 36 cents at their high. The speculative funds bought heavily, adding 40,000 corn contracts and 25,000 wheat contracts to their already long positions. Paris wheat futures followed, adding €5.50/t; their biggest daily gain for two years. London gained £5/t, setting a new contract high.

China's continued buying is the primary reason US grain stocks are lower and the draw down on US corn and soybean stocks over the last quarter is the second highest on record.

  • Black Sea weather supports markets

European wheat markets found support earlier this week from ongoing dry weather across much of the Black Sea and talk of further sales of French wheat to China. However, there are increasing concerns for the potential of the 2021 Russian wheat crop as a result of low soil moisture. Planting is reaching 60% of the planned area in line with last year, but rain is desperately needed for crops to germinate and establish ahead of the winter. Any notable amount of rain is lacking.

Russia has previously signalled that it may introduce export curbs in the second half of this season depending on the crop size and export pace. Concerns for the 2021 crops must also be a factor in ensuring sufficient domestic supplies are maintained. This week, Russia's deputy agriculture minister, Oksana Luk, said that the country's export quotas are relevant even with a good harvest. Export restrictions for the world's leading wheat exporter would create further price volatility.

Officials from Ukraine said the country's winter wheat area would drop from 6.7 million per hectare for the 2020 harvest to 6.1 million per hectare due to the extreme dry weather conditions. Farmers have drilled 25% to date with reports that the weather conditions this harvest have been the worst for ten years.

  • Wheat imports targeted by UK consumers

Amidst the volatile global grain markets, UK consumers continue to target imported supplies to meet their needs despite UK supplies being available to them at discounted prices. The fear is that should the UK government and EU negotiators not reach a post-Brexit trade agreement, then imported wheat from 1st January 2021 could have tariffs applied of up to £78/t. Wheat originating from Lithuania, Latvia, Estonia and particularly Germany is arriving at UK ports and consumers are trying to secure all they can in case this wheat becomes restrictively expensive in the new year.


BARLEY

  • Barley values find strength from global gains

Wednesday's quarterly grain stock report published by the USDA sparked a rise in global markets with barley values firmer, but not to the extent of other commodities. As a result, UK values firmed closer to the levels seen the week commencing the 21st of September after easing back at the start of this week on a lack of demand.

The UK remains competitive on the export market with demand from the EU and further afield continuing up to the end of December. With less than three months to go until the official Brexit deadline, ex-farm values are likely to see plenty of volatility, particularly given more swings and fluctuations in currency can be expected over the coming weeks, as we have seen throughout September.

Domestic compounders remain committed to placing barley in their feed rations, but barley isn't following gains parallel to other grains. The discount of barley to wheat, for example, has only increased as the latter has firmed, with the discount sitting as high as £45/t in some regions of the UK.

  • Southern Hemisphere harvest edging closer

Barley harvest attention will soon shift to the Southern Hemisphere with the Australian barley crop set to be of particular interest. Markets are expecting a substantial Australian barley crop that must find destinations outside of its traditional trade flow into South East Asia, such as Saudi Arabia. This is as a result of tariffs imposed by China. The trade will watch closely over the coming weeks to see if the Australian crop does reach its potential.

  • Malting market remains difficult to forecast

Given the unpredictability of further restrictions on social gatherings being put in place, particularly in 'local lockdowns', the malting barley market remains difficult to predict. As expected, usage is down over the summer months in comparison with 2019. However, with the weather turning very autumnal and with current restrictions likely to last well into the new year, the malting barley outlook is likely to remain uncertain for some time.


OILSEED RAPE

  • Bullish USDA report

A week of lacklustre trading was transformed on Wednesday by the release of the USDA's final 2019 Production and Stocks Report which sent all of the major crop markets sharply higher.

The trade had been expecting the USDA to revise upwards the 2019 soybean crop figure but this didn't happen and year end stocks were pegged 1.5 million tonnes lower than expected. The market is faced with a lower carryout figure from the 2020/21 campaign and even this relies on no further erosion of US bean yields and near-perfect South American weather. These latter two factors will now be centre stage over the next few weeks.

  • Concerns over domestic demand

UK domestic prices jumped by over £5/t on the back of the USDA report, but there has been a surprising lack of follow-through in trading today. China has started its Golden Week holiday, which will stem the flow of news from that part of the equation. Furthermore, buying into the crush plants is still tempered by concerns over the impact of the resurgence of Covid-19, coupled with a growing number of new lockdown restrictions. We saw back in the spring the devastating effect on demand for vegetable oils when our pubs, restaurants and fast food outlets were restricted in their activities. Getting this sector back to some level of normality would certainly help to support UK rapeseed prices going forward.


 PULSES

Buoyant bean market

This week, bean markets have remained firm whilst the trade patiently waits for more news on the Australian bean crop. There is the expectation of a big crop there, which will be competition for the UK crop into the Middle East.

Human consumption buyers are dipping in and out of the market, also prior to any news from Australia. If you want to achieve a premium for your beans, now is a sensible time to sell. During this short buying period, consumers can quickly remove their bids and opportunities can be missed.

Stable pea markets

Both quality and feed pea markets are stable as buyers are becoming more active; this translates into some encouraging on-farm values. Quality large blue samples are edging above the mid £200s per tonne going into the new year and feed peas are currently worth around £200 ex-farm; an unusually small discount to feed beans.


 FERTILISER

  • Nitrogen/urea

It has been an understandably quiet week in the nitrogen fertiliser markets as the current focus is on drilling.

Global urea prices have slipped back again over the past five days as demand slows. However, India announced another tender on 30th September, but as with the previous tender, much of this tonnage could come from China. This would leave North African producers to supply other markets, including Europe. Price direction will be driven by demand in Q4.

CF Fertilisers has withdrawn prices in the UK while it takes stock of the current markets. Imported nitrogen offers have been very competitive, even given that gas prices in Europe today are double what producers paid in the summer.

As soon as all price options are available, including the return of CF Fertilisers' levels, it's advised growers take cover before the increase in gas prices takes a firm hold. Demand is expected given positive drilling results.

  • PKs

Demand continues to grow this week as price increases are announced. Markets are starting to feel the pressure with exchange rates pushing up replacement costs.Phosphate values have moved up by approx. £10/t. Potash values haven't yet increased.

Planning all nutritional requirements pre-Christmas is advised, as supply may well be affected by Brexit and the continued impact of Covid-19.


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