WHEAT

  • UK wheat prices bounce
London wheat futures, together with French wheat futures, fell to new contract lows early this week under the weight of high yielding crops. However, the UK market subsequently enjoyed a £5 per tonne rally and moved higher by an unexpected wave of short covering. London futures were technically oversold and UK wheat was perhaps too cheap compared to other origins, which could have been the catalysts. However, in the short term, English ports are congested and there is little scope for additional business as logistics struggle to cover existing needs. The changing political landscape could also have been the driver for this market move. Parliament's action to block a no-deal Brexit gave sterling a lift but if the Brexit deadline slips to January this will give an extended period to ship into the UK's traditional European homes without damaging tariffs. The benefit of the London wheat futures' bounce is appreciated when compared to MATIF which gained little more than one euro from the low during the same period.

  • EU wheat exports need to step up
The latest export figures were published earlier this week and it was encouraging to see EU wheat exports for the first two months of the season ahead of last year. Up until 1st September 2019, 3.633 million tonnes of soft wheat had been shipped which is 7% ahead of last season's pace. The primary destinations accounting for over a third of the total were Saudi Arabia, Algeria and Egypt.


However, analyst Stratégie Grains estimates the EU-28 exportable surplus to be 24.8 million tonnes; 3.7 million tonnes up on last season. If you extend the current export pace, the EU will fall short of that estimate by 3 million tonnes. This highlights the need for the Union's leading exporters to become more competitive amidst strong competition from Russia and Ukraine.

  • Warning signals from the Southern Hemisphere

Following very successful Northern Hemisphere harvests the world is seemingly awash with wheat, leaving the long holders searching for a feature that might change the market's fortunes. Both Australia and Argentina have issues that could impact on their potential wheat production. 

Soil moisture has been falling in most of Argentina's wheat growing area, highlighted in a report from the Argentina Agriculture Ministry this week.
In Australia, water reserves in the east are below last year's low levels. With a dry forecast, trade estimates are now close to 19 million tonnes. The Australian Bureau of Agriculture and Resouce Economics and the United States Department of Agriculture are each at 21 million tonnes.

It is worth noting that a lack of soil moisture has also been reported in Ukraine and Romania as winter planting begins following a drier and warmer August than usual.

BARLEY

  • ​English ports still busy loading barley

A significant number of ships will be loading feed barley in many ports again next week which is a good example of how competitive we have been over the harvest period. Further sales have slowed up somewhat this week due to the rise in the value of sterling, lack of further available port capacity before the end of October as wheat cargoes also fight for space at export terminals, and buyers reluctant to pay more in euros. Vessels for the loading of malting barley are also showing for spot loading. However, the exportable surplus doesn't seem to be any smaller and the UK will have to remain competitive for many months more. This week's events in Parliament could prove decisive in giving the UK some more opportunities to trade exports to the EU in the short term.

  • Scotland makes progress with the spring barley harvest
By now, approximately 70% of the crop should be cut and awaiting transport into stores and maltings.
There have been germination issues on fields where crops were fit to cut but then the rains came, however, this is limited to certain varieties and geographies. Yields and nitrogen levels are good but there are a few parcels that have problems with skinning and screenings. Maltsters and distillers remain on the sidelines while they assess the data from this year's harvest.

​OILSEED RAPE

  • ​Stable domestic prices

Given everything that is going on with politics and in agricultural commodities, our domestic rapeseed market has been remarkably stable with delivered crush values the same today as they were at the start of August. Over this time period, US soybean futures are back to where they started and Paris rapeseed futures have appreciated by a modest 1%. Sterling has been strong in recent days and since the start of last month has firmed by 2%, making rapeseed imports cheaper by around £7 per tonne.

  • China shuns the US
The wider global oilseeds market continues to have a soft feel. US/China trade talks have been pushed back to early October while China is allowing oilseed meal imports from Russia from 2nd September onwards. This is part of their policy to divert suppliers away from the US while the trade dispute continues. This type of activity reduces forecast US export numbers which, in turn, negatively impacts futures market values. Other markets have a tendency to follow the lead provided by movements in US values.

 PULSES

  • ​Harvest

As the bean harvest moves northwards bean yields are still continuing to impress, with yields widely reported in the 5-6.5t/ha range. It's becoming more apparent, however, that Bruchid beetle damage is more widespread than in previous years. In many cases we are seeing samples that have very few obvious signs of infestation but, as we cut open the beans, we are finding up to 25% have either larvae or mature adults – in some cases still alive – waiting to emerge.

  • Feed values
Despite the increased yields and downgrading of more human consumption beans, feed values have risen £2-3/t this week following similar moves in the wheat market. Whilst there is no real correlation between feed wheat and bean values, some correction was expected in a market that that has fallen £15/t in the past week. Further price moves will be determined by more export sales, as beans are still not competitive for use by UK compounders and we will need to see further export sales of over 200,000 tonnes to ship the surplus from this year's harvest.

 FERTILISER

  • ​Nitrogen
As previously reported fertiliser markets are being strongly influenced by currency, as well as the prospect of a no-deal Brexit bringing in a 6.5% duty on imports from the EU on ammonium nitrate-based fertilisers.

With the turmoil in Westminster this week, it has been a difficult market to predict. However, the currency/tariff issue is only one factor in UK fertiliser pricing – another key indicator is the granular urea market as this underpins the nitrogen price globally. As we enter the fourth quarter of the year buying activity tends to pick up, especially in the major markets of Brazil, the USA, India and Europe. This leads to a firmer position from manufacturers (Algeria and Egypt mainly for UK markets). As a result, our view is that there is still potential for further price rises on the main nitrogen grades (ammonium nitrate, urea etc.) in the next two to three months. The extent will depend upon what happens to currency and that is in the hands of Parliament.

  • Phosphate and potash
The above scenario is mirrored in the phosphate and, although to a lesser extent, potash markets. Current offers are available that do not reflect predicted higher replacement prices, so our advice to farmers looking to replace increased P&K off-take from high yielding crops is to book product as soon as possible.

  • Sulphur
Sulphur requirements are also being finalised now that many farmers have completed rape planting. It is expected that some grades may be in tight supply this year so, again, please contact your Frontier representative to discuss best options for your cropping plan.



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