- Buoyant UK market
Another volatile week in the UK grain trade saw November futures hit new contract highs of £195 on Thursday, fuelled by crop issues globally. As a result, we saw a good level of farmer selling for both 2018 and 2019 crop at levels well above the cost of production. Wheat harvest nationally lies at around 40% complete, despite last weekend's rain hampering progress at the start of this week. With warm, dry weather forecast for the weekend and into next week we suspect this figure to rise quickly and for pressure on logistics to become the next key watch point.
- This week's fuelling factors
This week the German farm association, DBV, revised their last crop estimate down 2.5 million tonnes to just 18 million tonnes due to hot, dry weather impacting yields. On Thursday, the market was also shocked to see a 'Facebook message' from Ukraine's Deputy Minister for Agriculture, Maksym Martyniuk, who announced they would limit the amount of wheat available for export. This pushed MATIF €10 higher before questions surrounding the report's credibility took the market off the highs to close. The fact is, until the nervousness surrounding the EU crop size subsides, i.e. when the crop is in the grain stores, farmers will remain cautious sellers and the market will react accordingly.
- Pricing to import
Given the UK's tight balance sheet with a sub-14 million tonne wheat crop on its way, there will be a heavier reliance on imports from the EU and further afield. With current internal prices at season highs and up £30 in a month, UK feed wheat is the most expensive feed in the world and consumers are increasingly looking for the next best (cheaper) alternative. With both wheat and maize pricing to UK shores, there comes a point where demand for UK wheat dwindles and finding homes may become ever more difficult as consumers increase cover over the next few weeks.
- Feed barley continues to climb
The market for feed grains remains firm on the back of further global dry weather, with feed barley following feed wheat higher in a volatile week for London futures. Strong domestic demand is continuing, as winter fodder stocks are being utilised on farm at present.
- Spring barley harvest begins
Spring barley harvest has started in several areas across the UK. Early results are showing good quality, with samples meeting specifications across the board. Yields are being reported down on the year and we are still waiting for the later drilled spring barley to be harvested which has experienced the worst of the dry conditions.
- Malting barley premiums remain firm
Premiums remain firm on malting barley as the drought takes hold across Europe, even with firmer feed barley values. Please do keep in touch with your local Frontier contact.
- World news
This week, tariff talks re-emerged between the US and China but this time with false rumours that the two were talking of decreasing tariffs. This in turn caused Chicago soybean futures to initially gain before returning back to previous levels.
The Canadian canola crop is in good shape and continues to receive beneficial weather. Australia continues to be dry, with analysts now putting their canola production at 2.9-3 million tonnes which is down from the 3.15 million tonnes estimation a month ago.
- European news
Rapeseed is still very expensive in comparison to other oilseeds, which is showing in the market. US soybeans continue to trade into the EU and displace rapeseed at crush plants, which can switch oilseed types. The MATIF futures market currently seems overbought after a week of upward movement – a potential correction to this trend could be in the pipeline.
As harvest progress increases throughout the UK, yields continue to be mixed. Northern European yields are well down on last year due to the long, hot summer but the market seems to have a settled view on an EU crop of 19.6 million tonnes.
- Bruchid infestation
As the bean harvest gets underway following last weekend's rain, it's becoming more apparent that the levels of bruchid infestation have been far higher than first thought in the South and East. To date, over 80% of all bean samples have failed the grade for human consumption, with some samples reading over 60% internal bruchid damage. Next week will allow us to see how quality develops as the harvest moves further North, but it is likely that buyers may need to reduce their specifications if they want to maintain export volume from the UK.
- Increased values
As predicted, this week saw another price increase from CF Fertilisers and Yara, bringing UK fertiliser closer to values seen on the continent. The key drivers behind this remain the same - underlying strength in the granular urea markets on the back of the recent Indian tender, higher natural gas and ammonia prices, and more bullish crop values in European markets due to the drought.
Imports remain quiet as the market settles down but we expect traders to start committing for Q4 (Oct-Dec) shipments in the coming weeks.
Nitrogen sulphur products may be in tight supply before January and we would recommend you organise supplies of this essential nutrient now to avoid disappointment. We are seeing good levels of interest in decoupling sulphur from nitrogen by combining it with P&K application - talk to your Frontier contact for more details.
- Revisit nutrient programmes
Higher than expected yields and early senescence means that the large volumes of straw currently being baled will be exporting larger than usual amounts of phosphate and potash. Please take this into account when looking at your nutrition programme this year.Both TSP and MOP are firming, so it's worth considering taking cover at current levels.