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- Crop estimates rise and market prices fall
US Chicago Board of Trade (CBOT) wheat futures lost 5% of their value this week as traders reacted to increases in crop estimates for some of the world's major wheat producers. Improving Russian prospects were highlighted as a primary driver for the move. The Institute for Agricultural Market Studies (IKAR) raised its estimate to 79.5 million tonnes from 78 million tonnes as the Russian wheat harvest reached 46% completion and average yields surpassed last year, up to 3.66t/ha from 3.62t/ha.
49.7 million tonnes have been combined compared to 46.7 million tonnes at the same time last year. Additional selling pressure came from news that Canadian farmers could harvest a record wheat crop this season. Canada is one of the world's major wheat exporters and, according to the Canadian farmer advisory service FarmLink Marketing Solutions, wheat production including durum could reach 39 million tonnes. This would surpass the previous record of 37.6 million tonnes set in 2013. In July, the United States Department of Agriculture (USDA) pegged Canadian production at 34 million tonnes.
- Improving US corn yields adds weight to negativity
US corn crop potential is increasing following near-ideal weather conditions which are boosting yield expectations. Private analysts see the US corn yield reaching 182.4 bushels per acre - four bushels per acre above estimates from the USDA. If realised, this would add approximately eight million tonnes to the previous USDA US corn crop estimate made in July, taking it to 389 million tonnes. This would be 43 million tonnes more than produced in the previous year.
- EU wheat production continues to fall
European wheat futures have also dropped this week but have found some support from further production cuts for the major producers France, Germany and Romania. The French Ministry of Agriculture and Food dropped its wheat crop estimate for France from 31.3 million tonnes to 29.7 million tonnes.
French farmers have all but completed their wheat harvest, with 99% cut by the 3rd August; up from 90% the previous week. The Federal Statistical Office of Germany dropped its wheat crop estimate to 20.23 million tonnes, which is 12% down on the year and below the German cooperative's estimate of 22.46 million tonnes. This is due to a smaller cropped area.
Romania is one of the EU's major wheat exporters, regularly competing with Russia and Ukraine for exports to Egypt, for example. The Romanian Ministry of Agriculture and Rural Development predicts the country's 2020 wheat crop will drop to 5.5 million tonnes from 9.8 million tonnes in the previous year. Prolonged drought has seen yields fall to 2.9t/ha from 4.8t/ha in 2019. Romanian wheat harvest is 89% complete.
- Poor UK wheat production
With many farmers in the south of England likely to complete their wheat harvest this weekend, yield reports suggest the size of the UK crop could be worse than expected. Following difficult drilling conditions, the cropped area is down 25% on the year according to a survey by the Agriculture and Horticulture Development Board (AHDB). The prolonged dry spring and hot weather in May has proved to be damaging despite the welcome rainfall in June. Some have seen yields comparable to last year, but the vast majority of farmers have experienced yields as much as 50% below last year. Light land second wheat has suffered particularly and milling quality is also a concern. Protein levels are half a percent down on the year, leaving the majority of bread-making samples unable to meet the millers' minimum 13% specification.
- Winter barley harvest largely finished
With yields ranging from four tonnes per hectare to nine tonnes per hectare, the winter barley harvest is largely complete, including in Scotland. Generally, the grain is below 14% moisture content and of 65-67 kg/hl bushel weight, which is good for the export markets. In terms of malting barley quality, the lower nitrogen crops are in the south and the north with the Midlands, Lincolnshire and Norfolk producing higher nitrogen crops. In all other aspects, the barley is fine.
- Feed barley prices shrink in line with lower wheat markets
More trade has occurred on both the export and the domestic markets this week. In terms of export, prices dropped £2/t due to stronger sterling, muted demand and the thought that the greater part of the harvest is to come.
Spring barley is being cut in the south and the east with the lower nitrogen crops appearing in the south so far. Much more will be cut next week as the smaller-than-usual winter wheat harvest finishes up.
There have been many reports of secondary tillers causing green grains but also a number of examples of how storekeepers are managing this in their stores. Southern yields have been around six tonnes per hectare so far but there is still a huge volume to be harvested.
- Demand strong
Domestic markets have held up well this week as the harvest finally spreads north into Scotland. A reduced planted area combined with moderate yields is limiting any harvest pressure and it was only a recent firming of sterling that knocked values off the week's highs. European crush margins are currently good, with no signs of a change as we head into the autumn months. Demand for biodiesel is also strong and is running ahead of levels seen this time last year. Additionally, rapeseed markets have received a boost, given that fuel made from rapeseed is seen as more environmentally friendly than fuel produced from imported soybeans. France, in particular, is leading this initiative.
- Doubts over Australian prospects
It has also become clear in recent days that the Ukrainian harvest is going to be even smaller than forecast. Some analysts are now predicting the crop will come in at less than 2.8 million tonnes, which would mean a cut in Ukrainian export volumes for 2020/21 of around 800,000 tonnes.
Our domestic supply is likely to be down by a similar amount, creating a need for increased import volumes from Australia and Canada. The outlook for Australian production is scaling back as western and southern Australia continue to suffer from a lack of precipitation. Analysts will carefully watch the forecasts from here. Rainfall in August and September will be crucial for these crops and will have a significant impact on the size of Australia's exportable surplus.
- Harvest progress slowly picking up pace
This week, we have seen more growers dip into pea and bean crops in the south of England. Early marrowfat and large blue crops have seen reasonable quality at the cost of below-average yields. However, it is too early to draw any conclusive trends, as the bulk of pea harvesting is yet to commence.
A few more parcels of late-sown winter beans have been harvested with disappointing yields, which was to be expected given the less-than-favourable conditions for the late-sown crops. As within wider agriculture, consumers in the pulse world still remain hesitant in the current market climate. However, as we start to see more samples and progress through harvest, we should see buying interest escalate.
- Sampling is key for pulse crops
With new rules in place dictating that on-farm sampling should now be done by the grower, it is more important that accurate samples are being taken. By taking accurate, representative samples and requesting collection in a timely manner, growers put themselves in the best position to secure the highest premiums and smoothest service whilst selling their pulse crops. Please talk to your farm trader to organise collections and ask any questions about sampling this year.
This week has seen a continued firming of world urea markets which has pushed UK granular urea prices higher.
India's latest tender for more granular urea and awareness in the market that more needs to be bought has pushed prices upwards. The cost is now close to $280/t, which is approximately £270/t delivered to farms in the UK. The current market shortage in India will inevitably mean September tonnes will trade at higher prices. Unless China starts producing and offering product onto the world markets, it is likely urea prices will stay firm for some time. UK suppliers of ammonium nitrate have withheld from moving prices after last week's increases, but will be watching the urea market closely.
Markets are picking up a little as demand is rising for DAP for oilseed rape establishment. All straights values are currently at low levels when measured against the last five to ten years and could well be starting to firm. Currently, currency is favourable, but be wary if currency changes direction.
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