- Markets catch a cold
Having rallied to 18-month highs early last week, world wheat markets have subsequently taken a negative turn with US Chicago Board of Trade (CBOT) wheat futures leading the move lower. Expectations for sizeable US wheat export trade to China following the signing of 'phase one' of the US/China trade agreement so far has failed to materialise, triggering a fund sell-off. The worsening coronavirus outbreak has added to the negative market sentiment with a perception that it will inhibit trade to China. European markets have followed and London wheat futures have now lost £7 from the recent highs.
- French wheat proves most competitive
Unofficial data has reported that overall EU soft wheat exports are at 16.9 million tonnes – 79% ahead of last year. This has been significantly contributed to by French wheat exports which have been moving at a fast pace this season. However, recent strike action at French ports has seen export business switch to Germany and the Baltic, causing French prices to ease. Egypt tendered for wheat this week and French wheat was the cheapest offered on both a loaded-at-port and a freight-paid basis. This was ahead of Russia and Ukraine who have dominated sales in recent weeks. Its average sales value for March delivery was $246 including freight – almost $3.5 below the previous Egypt purchase on 14th January.
- Upbeat Russian 2020 wheat prospects
Russia enjoyed settled weather during the autumn, allowing the winter drilled grain area to extend to 104% of original expectations. 18.2 million hectares were drilled compared to 17.6 million hectares the previous year and the subsequent winter weather has been kind. A Russian news agency this week reported 6% of the country's winter grain crop was in a bad condition, although the Russian weather forecaster, Hydrometcentre, put that at just 4% compared to 8% of the crop last year. The key wheat growing areas in central Russia are forecast to have more rain and snow than usual during February. This has led to upbeat estimates already for the 2020 Russian wheat harvest of up to 85 million tonnes compared to 73.5 million tonnes in 2019. However, up to 40% of the Russian wheat crops are spring drilled and will need to avoid prolonged early season heat during the growing cycle.
- UK feed barley competitive
UK feed barley is internationally competitive at the moment and we would encourage growers to take advantage of current values which may come under pressure later in the season. Unlike feed wheat, new crop feed barley is a discount to wheat; therefore, there is no incentive for either farmers or merchants to carry any of the large surplus of barley into new crop.
- Continued pressure on malting premiums
Malting premiums remain under pressure. Many areas of the UK are already finding that the extra haulage to a malting barley destination and small premiums are eroding most, if not all malting premium compared with feed. The only limited domestic trade is merchants covering parcels that get rejected. The Maltsters Association of Great Britain is not accepting any fallbacks on quality, so any barley that does not meet full specification should be considered feed. The export malting barley market is in a similar situation, with most EU buyers reporting that they have covered virtually all their requirements for the remainder of the season. It looks like the majority of unsold spring malting barley should be considered feed.
- Spring seed in high demand
With the well publicised issues regarding autumn wheat sowing, everything is pointing towards another large spring barley crop for harvest 2020 and spring seed is likely to get tight. It looks prudent to have a contract in place for harvest 2020 malting barley. Frontier is offering guaranteed minimum premium contracts, feed and malting barley pools and futures-related distilling contracts. Please speak to your local farm trader for marketing options available in your area.
- Further price weakness
The slide in oilseed prices has continued this week with domestic markets losing a further £10 per tonne. US soybean futures have hit a new eight-month low in recent days. It is clear that markets have been spooked this month due to the toxic combination of slow Chinese imports, burgeoning South American soybean crop and macro-economic woes driven mainly by the increasing spread of the coronavirus.
- Tighter markets in prospect
Further losses are possible in the short term, but the long term market fundamentals still look supportive. The trade journal, Oil World, recently stated that the current price weakness is temporary and that "the fundamental situation will reassert itself once new factors supporting the tightness become more obvious". It also predicts a steep drop in stocks of the eight key global vegetable oils and a drop in palm oil production at a time when consumption is increasing. In Europe, we are well aware that the task of achieving an increase in rapeseed imports during 2020/21 will be challenging.
- Fund sellers evident
Much of the recent weakness in markets appears to have been driven by a sell-off by fund managers in futures markets who had simply got themselves too long, rather than any pressure from producers or processors who keep themselves closer to market fundamentals. There are never any certainties in commodity markets but it feels as though there should be better times ahead for holders of oilseeds stocks.
- Egyptian demand strengthens market
Old crop feed beans continue to rise, driven mostly by new sales to Egypt. Usually Egyptian buyers would only buy the very best spring beans with low bruchid counts but, when there is limited supply available from either the UK or Australia, they will buy feed beans in bulk and then clean and colour sort them to make a low grade human consumption sample.
This strength in the market will continue as long as Australian suppliers withhold beans but, with an average yield there this year and already two vessels sailing to Damietta, this situation may not last long.
Demand for both UK and imported AN has generally increased this week. Physical applications have been achievable in some locations, whilst other areas continue to be challenged by poor weather conditions slowing down proceedings.
Prices are increasing slightly as we move towards February, with domestic demand picking up and imported AN stocks reducing. It is possible that, given the current exchange rates, another rise could be on the cards.
Urea markets have firmed globally by $10-15/t and, with the current exchange rates, prices are forecast to increase in the UK.
Growers are advised to purchase products at the current numbers and stay ahead of the logistical pressures that look set to hit the industry very soon.
Nitrogen sulphur grades could also be in short supply as a result of suppliers and shippers holding back on making and importing products due to the changes in cropping in the UK and across Europe. Sulphur Gold (29 N, 20 SO3) is ideally suited to many cropping options, both arable and grassland.
In general, MOP, TSP and DAP prices have been at their lowest for many months. However, this week DAP moved up by $39/t on the international markets. This rise will soon be reflected in the UK when stocks are replaced.
Get in touch
Alongside its divisions, SOYL and Kings, Frontier is hosting a series of 17 winter training events. Open to all farmers interested in learning more about the use of digital technology to improve crop production performance, the events will include valuable insight into MyFarm and its role as a complete farm management platform.
You can find your local event and book your place by visiting our website.