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- Canadian wheat crop seen at a 14-year low
Earlier this week Statistics Canada (StatsCan) updated its country's wheat crop estimate, now seeing the crop falling to 22.95 million tonnes. This compares to 35.18 million tonnes last year and, if realised, will be Canada's smallest crop for 14 years. Persistent excessive heat and dryness for much of the growing season has slashed yield potential for Canada; one of the world's major wheat exporters.
In its August World Agricultural Supply and Demand Estimates (WASDE) report, the United States Department of Agriculture (USDA) cut its Canadian wheat estimate to 24 million tonnes from 31.5 million tonnes in July. Last season, Canada exported 27.5 million tonnes of wheat and ranked third in wheat volumes shipped, behind Russia and the EU and just ahead of the US. This season's crop losses will have a major impact on world wheat trade flows and has been one of the primary bullish price drivers for wheat markets. US spring wheat futures are 60% up on the year as a result of tightening quality wheat supplies.
- Egypt buys from those with plenty
Romania and Ukraine have both enjoyed record-breaking harvests and have provided the most competitive offers to Egypt in their latest tender this week. Egypt bought 120,000 tonnes from Romania and 60,000 tonnes from Ukraine but, with average prices around $340/t including freight, prices were still $9/t higher than the previous tender on 18th August. Last week, Romania announced its harvest would reach a record-breaking 11.4 million tonnes and Ukraine is now expecting its wheat harvest to produce 32 million tonnes; up from 25.5 million tonnes last season.
- Weaker US corn prices
US Chicago Board of Trade (CBOT) corn futures have fallen to their lowest level for almost eight weeks with Hurricane Ida hitting the US Gulf Coast with a devasting impact. Many export facilities have been severely damaged and may be left inoperable for several weeks. Concerns that export sales will be lost have weighed on corn prices. Further price pressure has come from beneficial rainfall which is seen as boosting yield potential to levels above those estimated by the USDA in its August report. Speculative funds still hold significant long positions in the CBOT corn market and must also be mindful of the anticipated bumper corn crop from Ukraine. Analyst group SovEcon sees Ukrainian production rising to 39.3 million tonnes - up 9 million tonnes on the year - which could attract Chinese buyers away from US supplies.
- Discount between feed wheat and feed barley narrows
This week there has been active two-way trade in the domestic feed barley market, although export markets have been wide with minimal trade. The discount between feed wheat and feed barley has narrowed this week. At narrow spreads, less feed barley will be used in the domestic ration and barley inclusion will be reduced.
- Attractive premiums available for malting barley
The malting barley market continues to be well supported with attractive malting premiums available. Quality remains good with very low nitrogen and good screenings levels being a feature of the crop. Premiums are being supported due to the spring barley that remains in the field still to be harvested, but it is encouraging to note that even recently cut spring barley samples are generally holding on to malting quality. The average moisture of spring barley being cut this year in England is understandably far higher than normal; with strong malting barley premiums available, it is imperative to preserve malting barley quality. Malting barley will need to be gently dried and cooled to ensure safe long-term storage. For those growers who are unable to do this, it is advisable to sell malting barley now for prompt movement in order to secure the malting premium before quality deteriorates.
- Malting premiums will come under pressure if malting quality remains good
Once again, the total UK barley crop comprises a large percentage of spring barley. Today, the picture of both feed and malting barley remains uncertain while determining how much of the spring barley crop will pass for malting and how much will fail and become feed. If malting quality continues to be good, malting premiums are likely to come under pressure. However, if the quality of the spring barley still to cut deteriorates, this would be bearish to feed barley prices.
- Markets easing but still close to contract highs
Domestic rapeseed prices have eased off by around £10/t this week with weather around the world becoming a little more helpful and US soybean futures markets dipping to levels last seen at the end of June as traders worry about delays to shipping programmes following the recent storm damage to facilities in the US. Current price levels are still close to all-time highs and £150/t more than they were last autumn. This means domestic rapeseed growers still have a great marketing opportunity before Australian supplies hit the European market at the end of this year.
- Canadian crop drops sharply
The official StatsCan report was finally released this week on the Canadian canola crop and although it was marked down to 14.75 million tonnes, which represents a 24% decrease, this figure is still larger than expected and therefore viewed as bearish to markets. The next official update on the crucial Canadian crop will be released in two weeks' time and, with more recent satellite imagery, this figure could dip to nearer 14 million tonnes. Add into the mix an underlying fear of the economic impact of Covid plus a slowing Chinese economy - which last month saw its first fall in factory activity in 18 months - and it's not hard to see why markets have eased back from their recent highs.
- European consumers switching to cheaper alternatives
There is also some evidence that the high price of rapeseed compared to all other sources of vegetable oil is finally having an impact on demand. It is expected that the European rapeseed crush in 2021/22 will be at its lowest level for eight years, with both food and energy use seeing multi-year lows. Sunflower oil consumption is projected to rise by 14% in the EU following increased imports from the Black Sea and higher domestic production in Romania, Bulgaria, France and Hungary. European rapeoil production is expected to fall by over 6% in 2021/22.
- Peas assessed for colour and quality
As harvest progresses, a few more samples are becoming available for assessing both peas and beans in terms of yield and quality. Peas, in general, have yielded quite well but the quality is very variable. Bleaching levels are also wide-ranging, but samples can now be categorised into bleached, two-tone (some bleached and some green), very pale green and strong green colour. The prices that can be achieved depend on colour and range from £210/t as feed up to £260/t for the very best quality. Spot demand is very limited as there was a large carry over of old crop peas as well as a large volume of contracted crops pre-harvest.
- Winter beans unlikely to be suitable for human consumption
It's still too early to assess bean quality but winter beans will generally not be suitable for human consumption premiums as despite lower bruchid levels than last year they are too stained to be suitable. Better results are expected from the spring bean crops but, in some areas, harvesting is still 2-3 weeks away.
The global nitrogen market remains firm as reported last week with high gas prices, an increase in ammonia values due to a shortage in ammonia and high freight rates causing higher production costs.
India still has a requirement for urea and a further tender is due imminently. Prices in the UK appear to be firm and the market slow; however, currency and freight rates are keeping the values up.
UK ammonium nitrate (AN) prices increased last week by £20/t, which was higher than anticipated, with prices of imported AN following this price increase. European values have also increased further again this week.
One major UK supplier has now released its spring 2022 UAN prices which look competitive in the current climate. Consideration should be given to the extremely volatile nitrates market; timely purchasing decisions should be made to cover spring requirements. Logistics, freight and product availability to fulfil this growing market sector will all come into play over the coming autumn months.
PK demand is steady while growers complete the last of their harvesting. MOP remains firm with no sign of values slipping and further increases likely. Logistics remain an issue in all sectors, not just agriculture, and will do so for the foreseeable future. Growers are strongly advised to cover their requirements as soon as possible before further price increases are added to the problem of haulier shortages. With the higher PK pricing, some growers are contemplating leaving the buying decision until later this year or even until spring 2022, which will add even further pressure to the logistics issues. Spring looks as if it will be very busy with less capacity to deliver, so early ordering looks favourable. Please contact your local Frontier representative to discuss options.
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