- US farmers struggle with adverse weather
Continued adverse weather which has prevented US farmers from completing their corn crop planting this spring remains the primary world wheat price driver. The speculative funds had built a record short position on the United States Chicago Board of Trade (CBOT) corn futures market which earlier this month had reached almost 350,000 contracts, the equivalent of approximately 47 million tonnes.
Analysts were expecting US farmers to increase their corn crop area by 3 million tonnes on the year, adding to plentiful stocks and a heavy world balance sheet following a very successful South American harvest. However, the slow planting pace has seen the funds cover their short positions and, in the process, lift CBOT corn futures to a three year high. By the end of last week the United States Department of Agriculture (USDA) put corn planted areas at only 58%, well behind trader expectations of 63%. This was up from 49% the previous week but last year at the same point there was 90% planted, in line with the five-year average. US farmers have never been so far behind with planting and, with fields waterlogged and the drilling window closing, the world's biggest corn producer could have a considerable shortfall on their expected crop.
Earlier this month the USDA saw the US 2019 corn harvest producing 381 million tonnes, up from 366 million tonnes in 2018. However, it is now extremely unlikely that this will be achieved. Yesterday, in their latest monthly crop report the International Grains Council cut their 2019 US corn crop estimate by 9 million tonnes, reflecting the difficult drilling conditions. However, it would seem likely this is too modest an adjustment and that a far more significant cut will be the reality. In the meantime, the markets will be watching closely when the USDA publish their next planting progress report on Monday evening.
- UK wheat prices rally £20 per tonne
The 2019 London wheat futures have put on an impressive price rally since early May which reached £20 per tonne at their peak earlier this week. Following the US futures markets, UK prices were helped further by the weakening sterling, which provided a selling opportunity for farmers who had been mostly absent from the new crop market for some time.
- Old feed barley trade continues
Higher volumes of old crop feed varieties continue to come to market as merchant and farm long holders continue to liquidate stock in advance of an anticipated earlier harvest. This has found markets into Spain where they finish off their cover ahead of cheaper new crop supplies. This means the UK will go into new crop without a burdensome stock carryover.
- US crop woes dominate crop 19 trade
- Quiet malting barley market
- Weather dominates conversation
The markets this week have been driven by the weather. Heavy rains have continued in the US Plains and some key states are way behind the pace in terms of planting soybeans and corn. Funds had held large short positions in both corn and beans and, as reported, a large percentage of that short has been bought back in this week as futures prices have risen. Next week, the USDA will once again report on the weekly planting progress and traders will be keen to see progress.
Europe and the Black Sea is starting to warm up and it is dry in Australia. As a result, weather is taking over from politics as the main driver in the oilseeds market for the time being. Early this week, we saw some key analysts decreasing the forecast for European rapeseed production on the back of poor planting conditions in the autumn. The knock-on effects are now being seen in areas from France across to Poland.
- Bean markets quiet
Volatility and high levels of activity have returned to most markets this week but beans have been somewhat neglected. We have seen some action from farmers fixing their base prices on future related contracts but flat price trading on new crop is almost nonexistent at the moment. Physical bean prices have not risen in line with the £10 tonne hike in wheat futures over the last couple of weeks, which makes our £40 tonne premium over future contracts even more attractive to bean growers with no marketing cover.
- Seed statistics
We continue to debate the likely size of the upcoming UK bean harvest in advance of the Agriculture and Horticulture Development Board (AHDB)'s planting survey data which is due out in July. Winter bean seed certifications for England and Wales for sowing last autumn were down by 27%. The current data for spring beans is showing a 45% reduction against the same point last year but the final picture on the spring seed won't be known until later next month. All indicators suggest a reduction in the UK pulse area but we have to be hopeful that the yields will be much better from the 2018 crop. Good yields and good quality will help to support the market as it will support the export trade, whereas good yields and poor quality would put pressure on feed values which are currently too high to be of interest to the UK feed compounders.
There has been more talk this week on 'new season' nitrogen markets for the UK but no sign of when it will start.
Other European markets are running well for July as the June tonnage is now already committed. No imported 34.5% nitrogen is being offered, partly because the shippers don't have a benchmark in the UK from CF Fertilisers, but mainly because supply of product is very tight. In addition, one major supplier in Eastern Europe has a shut-down for a minimum of eight weeks, adding pressure to European available tonnes. Looking at the current exchange rates, any imported AN offers would be difficult to make work for the UK grower.
Urea is still holding up due to global demand, added to reports of lower than normal surplus stocks and repeatedly weak sterling.
TSP/DAP markets are giving UK farmers the chance to buy some straights at lower numbers to this time last year. Already, the currency factor over the past week has caused prices to hold but they could rise as suppliers replace stocks. For your phosphate requirements, please speak to your Frontier contact.
- Foliar N
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