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It has been a relatively quiet trade week, with a lot of Europe out of the market for All Saints Day on Wednesday. The Marché à Terme International de France (MATIF) remained open, but it was very quiet.
The London International Financial Futures and Options (LIFFE) May '24 wheat closed on 27th October at £197.65/t. This week, London futures hit a high of £199/t on Monday, followed by a low of £192/t on Tuesday before recovering to £196.40/t last night. This is a net change of -£1.25/t since last Friday night.
MATIF May '24 wheat followed a similar pattern, but in a much tighter band. Last Friday, it closed at €240.25/t. Futures hit lows of €237/t on Tuesday and recovered to €239.50/t last night, meaning these figures didn't quite beat last Friday's high.
In terms of the UK/French spread, MATIF works out at approximately £210 for 11.5% protein wheat - a premium of around £13.68 to LIFFE. Looking at these figures, it is clear to see why UK wheat isn't competitive for export, even against French wheat let alone that of Black Sea origin.
The difference between LIFFE old and new crop is something to watch. The gap between November '23 and November '24 is a huge £23/t as of last night. May '24 to November '24 is currently at £9.70/t.
Trade continues through the Black Sea export corridor with Ukrainian wheat exports for July - October put at 4.5 million tonnes - 8% less than the same period last year.
Interestingly, rail volume has increased, supplying Pivdennyi, Odessa and Chornomorsk ports with wheat to fill the arriving ships. Based on the ships that are due to arrive, it's reported that the current focus is on corn export rather than wheat.
Earlier in the week, Tunisia bought four 25,000-tonne shipments of soft wheat - thought to be of Russian origin - for delivery in November/December at the $270/t marker. Russia continues to offer 12.5% protein milling wheat at around $230/t, which is still $10/t cheaper than Baltic supply and $19/t cheaper than German supply.
During the second half of the week, there were claims that Russian planes had been dropping explosives onto shipping lanes, but vessels continue to transit slowly. Further delays could impact this passage though, as Ukraine plans to make it mandatory for all exporting companies to complete registrations in order to prevent tax evasion via cash deals. The increase in revenue is much needed for the country's defence against Russia. Ukraine's Ministry of Agrarian Policy and Food has recently reduced its winter wheat planting forecast by 2.9%.
The weather continues to cause chaos for growers across Europe. This week saw the arrival of Storm Ciaran which battered northwest France, the Channel Islands and southern England with torrential rains and winds in excess of 100mph.
Soils are already saturated in many areas, putting great strain on newly drilled winter crops and causing significant delays for those trying to get more winter crops drilled. French winter wheat plantings are now 62% complete.
Elsewhere, central Europe and southern Russia are very dry. As it stands, weather is putting stress on winter plantings across large areas of Europe, with conditions being either being too wet or too dry.
UK consumer demand remains slow, with destinations for UK feed wheat still scarce this side of Christmas.
With around one million tonnes of surplus wheat in the country and very little shipped (mainly due to wheat of Black Sea origin being much better value for the buyer), it's hard to see a bullish domestic market at the moment.
As winter plantings continue to struggle against adverse weather conditions, it could push growers into an increased percentage of spring cropping.
In the absence of any export demand at prices that are competitive with domestic sales values, all UK ex-farm feed barley values are currently derived from what merchants can sell internally.
This means that even Cambridgeshire farm feed barley is heading north and west, and Kent barley is heading into the West Country. While barley from Central England has always ended up in the Northwest to a degree, it is much more extreme this year.
With an exportable surplus of feed barley still to sell, the question remains: How long can the domestic market suck up the supply? We estimate that this can be achieved until Easter, but thereafter we will need export markets to take the surplus. These will need to rise by £10/t to maintain today's forward values, which currently looks like it will be difficult to achieve.
Prices rose last week due to buying interest from Danish merchants, who realised that their supply of useable malting barley was less than predicted around a month ago.
The Danes had to buy back barley already sold, which drove the market up €13/t. This, combined with supply losses in the South of England due to germination failures and the confirmation of a poor Swedish crop, helped change the sentiment for what was a gently declining price.
The EU supply and demand balance sheet is very tight, but this does not mean ever rising prices. Growers with unsold quantities are keen to lock in and move grain that is historically a high premium over feed barley. Price moves over the next few months will require demand from brewers if these new higher levels are to be sustained.
Given ongoing concerns about the wet weather prohibiting winter cereal sowing, attention has turned to spring crop opportunities. Scotland has largely achieved its intended sowing of winter crops, especially in the Scottish Borders, so there won't be much of an increase in spring crops there.
The English spring malting barley area will probably rise to a degree, but at this stage it's not clear by how much. If you're a grower facing these challenges and unsure of the best course of action, questions to ask yourself are:
Rumoured closure of the Black Sea export corridor helped rapeseed prices recover from recent lows. However, evidently this proved to be inaccurate with multiple vessels reportedly leaving safely via this route.
The market retreated on news of the continued flow and gave European crushers confidence there would be little disruption to seed from the Black Sea. Another current key feature is the expected Australian harvest which looks likely to meet production expectations. Whilst not as high as last year (6.7 million tonnes), there remains a significant surplus of rapeseed which will push into Europe to find additional demand.
Supportive aspects of the oilseed complex remain to be the delayed plantings of soybeans in central and northern Brazil. In other areas of Brazil, there are more re-plantings than usual which could compromise final yields. If these conditions continue, global soybean prices will likely see some significant price benefit which could help support other oilseeds and their products.Soybean, and more recently Canadian canola oil, continue to see increasing use as a feedstock in US biodiesel production. Recent Environmental Investigation Agency (EIA) figures show record production in August '23 - a figure the global oilseeds trade will keep a keen eye on which will add to overall demand.
Prices continue to hold firm in the bean market and there are high premiums still to be made over wheat, even as short merchants start to settle with their aggressive buying.
The UK domestic market remains strong and we are already starting to see an impact to demand as a result of the consumer drive to replace soya. Even with no signs of fresh export demand, the UK market has enough demand to support current prices. However, with cheap EU beans and relatively low-priced mid-range proteins, it is difficult to see prices rising much further; they could even fall from their current highs as we progress into the new year.
The urea market has been quieter this week, as traders and manufacturers await news on forward gas supplies for European producers.
In Egypt, several producers have had gas supply reduced or have turned off production for two to five days, although this could extend further. Gas suppliers believe this is to ensure that demand from the power generation market is met.
Confirmed shipments and movements continue to be announced following the recent Indian tender volume, with some speculation still around the agreed Chinese volume from earlier tenders. There has been updated import/sales statistics, indicating that China is well above its three year average on sales/imports into the country. Traders will be watching this due to the supply/demand effect on global urea production.
Ammonia continues to trade at high numbers - admittedly in small parcels across the globe. Although both UK and imported ammonium nitrate options remain relatively unaffected in the UK market, it would appear that importers have recognised the demand from growers for later delivery options. Thus, we have started to see nitrogen and nitrogen sulphur product options for post-Christmas delivery.
As expected, liquid suppliers have increased their pricing to reflect the increase in raw material costs. This doesn't put liquid buyers at a disadvantage as the liquid spring offer still shows value when compared to ammonium nitrate options available for spring delivery.
The UK fertiliser market continues to see a conversion from solid to liquid, as growers look to improve accuracy and on-farm efficiency - the UK fertiliser market is now 20-30% liquid fertiliser.
As expected, we have recently seen DAP increase, with further rises likely as we head towards the end of the year.
There has been no movement on straight TSP yet, but we may see small incremental moves upward.
Phosphate and potash (PK) grades, such as 0-26-26, have moved up by varying amounts depending on the phosphate content of the grade.
There are no changes to report on muriate of potash (MOP) at this stage.
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