- Price shift predictions
The decline in prices over the past fortnight has been halted this week, with UK levels re-bounding some £5/t at the farm gate. A finely balanced UK supply (alongside ongoing concerns about how the global flow of wheat will be maintained from Russia, the current cheapest origin) continues to cause nervousness amongst consumers and retailers. Many envisage a shift in prices is inevitable at some point this season if world trade flows change to more of an EU or US based supply. The big debate is 'if' and 'when' this transition could take place.
- Milling premiums find short term support
Post harvest feed markets have started to become a subdued affair as the flow of imported feed wheat quells demand. However, from a milling perspective, spot demand has been remarkably buoyant with the merchant trade scrambling to secure September cover. This has added unexpected short term support to milling premiums when viewed against the back drop of a large, usable crop of Group 1 wheat. This looks set to exert a bearish tone to the coming months' trade, while we sit in an uncompetitive position against other origins from an exporting point of view.
From here, the best sell for suppliers looks to be premium wheat, as oversupply in the quality sector has to transfer to feed at some point to balance the books.
- Harvest moves north as market waits
Better weather has allowed the Scottish spring barley harvest to progress at pace, with dry conditions forecast into early next week as well. Much like England, quality is variable with early indications that the best quality is being seen in the north and south of the country.
The market is waiting for any movement in nitrogen specifications before prices move in a new direction. Higher nitrogen levels have been reported in Europe and domestically, with the poorest results in the UK seen in the Midlands. However, consumers will be reluctant to alter specifications.
- European fodder shortage remains in play
Feed barley continues to trade within close proximity to feed wheat, highlighting its importance to domestic consumers.
The fodder story remains relevant across the UK and northern Europe, with dry conditions forecast well into next week for much of this area. Maize crops have already been forecast down in France and Germany, whilst the UK crop has also been affected by the drought and harvest is set to begin in the next few weeks.
Attention further south is shifting towards crop 19, with both winter malting barley and hybrid feed barley well worth considering. Please speak with your local Frontier contact to discuss varieties and seed options.
- Weak domestic markets
This week has finally seen an end to the UK rapeseed harvest, with the last crops being combined in the north of Scotland. The market has drifted lower following the combination of a firmer pound, Brexit negotiations continuing to take shape and a softer oilseeds market around the world. Europe is seeing a steady stream of boats from the competitively priced Black Sea ports, with most crushers now reporting good cover until the end of this calendar year. Canadian canola is also pricing itself in and these factors have put a firm lid on domestic values. The demand side of the market is also not helping, with rapeseed oil expensively priced compared to other oils such as soy, sunflower and palm.
- High US stocks predicted
The key to the market going forward will be the outcome of the trade war between the US and China. Looking at oilseeds alone, it appears that both sides really need a solution to allow normal trade flows to resume but this conflict is about much more than trade in soybeans. A solution may not come in time to save the US from having huge carry out stocks at the end of 2018/19 and this will have an ongoing negative impact on forward prices.
- Supply and demand shapes market
The bean market has now disengaged from trading at premiums based on wheat futures values. With the realisation of a much smaller crop and very little available for human consumption, traditional pressures of supply and demand come into play.
Premiums for the few human consumption beans are now over £30/t in most areas and feed beans in the west of the country are trading at £3-5 premium to the east, as feed compound buyers are hungry to take more cover. Some feed bean cargos have traded out of the east coast this week and these are being used to cover the shortfall of Baltic beans originally sold into Scandinavia.
- Global urea markets remain bullish
Whilst some markets around the world are resisting the recent hikes in global urea values, a new level has been set and offers ex-North Africa are now in excess of $300/t; their highest level since July 2015. This coupled with a consistently weak pound means that UK values are holding firm at £300/t.
As the dust settles on last week's increase in UK AN price from CF Fertilisers, it is becoming apparent that this reflects values seen from the continent for imports. Current offers for full cargoes into the East of England put imported products at £270/t at the port side and so are significantly more by the time it has been discharged and moved to farm.
This all indicates that the markets will remain firm, at least until the end of the year and possibly even through to the end of the first quarter of 2019. For those with significant volumes of nitrogen and nitrogen sulphur left to buy, now is the time to be talking to your Frontier contact for the best current offers.
Phosphate prices continue to rise as replacement values are being re-priced based on new currency levels and higher raw material costs (phospheric acid). TSP is now above £350/t in most areas - this is £50 higher than January levels and, whilst the speed of increase may not be as high as for nitrogen, there is still talk in the trade of further price rises to come. In a year when replacement of P & K from baled straw is in everybody's minds then, as with nitrogen, there seems little value in waiting to book requirements for both P&K whether as straight TSP,MOP or in PK,NPK products.