- 'Bears' 1 vs. 'Bulls' nil this week
World markets have had to digest another USDA WASDE data release that was not bullish for wheat markets. Reductions in southern hemisphere crops were smaller than anticipated and the feed grain complex was boosted massively by China's unexpected stock find of 148 million tonnes. The grains complex feels heavy, with export parities of major world supply origins starting to converge.This leaves the remaining 'bulls' holding out hope for Russia to implement a slower pace of exports – the only thing remaining that could cause problems in a seemingly well-supplied market place.
- UK domestic demand falls in the short term
From a UK trade perspective, consumers of feed and milling wheat are covered into 2019. As prices fall, there is limited interest from these consumers to take further cover. The UK London futures market has now fallen £12/t in the past month. Even with this fall, the UK remains too uncompetitive to win any export orders. This will have to change as the once tight UK balance sheet now gives way to an ample supply for the remaining demand. This follows the high corn and wheat imports and the closure of the biofuel outlets.
Milling wheat supply looks particularly heavy for the rest of the campaign and, while premiums are perceived to be low, there is still scope to see further declines.
Therefore, it's advisable that the strategy from here is to secure quality wheat premiums for the remainder Q1 2019 before retailer demand focuses on the summer months at lower levels.
- Feed barley prices follow wheat downwards in England
A lack of fresh demand in the southern half of the country has sent values lower this week. There is a limited demand this side of Christmas. Currently, the merchants continue to execute a sizeable programme from the southern ports, however, it's unlikely that new business will appear until the new year.
- Malting barley exports continue an active pace
There is a continued flow of malting barley vessels from the UK to alleviate the logistics issues created by the continued low water levels across the rivers of Europe. This gives sellers an opportunity to release stocks ahead of the uncertainties surrounding Brexit.
- Domestic OSR prices down on the week
In the last week we have seen decreasing domestic rapeseed values, mainly due to a stronger pound sterling after rumours that the Prime Minster has secured a deal with the EU. This in turn is making domestic OSR look more expensive against other sources.
The harsh drought is continuing in south east Europe. Crop watchers are concerned with the effects it may have and, as a result, a greater area of OSR will likely go to winter wheat or other cropping.
- USDA report
This month's USDA report brought a few unexpected numbers, with a decrease to both yield and production which were below trade estimates. However, this was more than offset by an increased carryover number of 8%. This was mainly due to decreased soybean demand from China.
Soybean plantings in South America continue at a pace, prompting some analysts to call for the earliest-ever start to the new season export campaign. This is an ideal scenario for China, as it needs to find beans from somewhere and in some urgency.
The Australian canola harvest has kicked off in the west and, so far, early yields are better than expected. In Canada, canola is now largely gathered in and reported yields are decent, despite the recent cold and wet spell.
- Bean demand unlikely
Despite the strength of sterling and the decline in wheat values, feed beans have traded £2-3/t higher this week as shippers continue to cover old short positions. It is unlikely that we will see fresh bean demand, as a further two small cargos of imported peas have recently been transacted into the UK.
Two more vessels are due to be loaded in the next two weeks and as a result we expect to see some selling interest as farm balances start appearing.
- Winter bean opportunities
Recently planted winter beans are now emerging having been drilled into near perfect seed beds. With the uncertainty over the final bean hectarage planted for harvest 2019, Frontier is currently looking to secure supplies at a feed price of £20/t over November 2019 wheat futures prices. Please contact your local Frontier farm trader for more information.
CF Fertilisers have now removed any November or December nitrogen offers. This suggests the UK market supply will be tight through to the spring. They moved the price on a little from the previous offers, recognising the slow in demand as farmers get close to finishing drilling. Once farms take a fresh look at requirements for the spring, demand will return to the market.
The European market has again moved on a few euros but CF Fertilisers declined to follow it this time. UK nitrate offers remain below those of the European producer. A large proportion of UK nitrogen sulphur products are still to be supplied due to production issues, so it may be that the next job on farm is to make sure you have all the season's sulphur organised. Don't forget, the polysulphate range may help with any requirements this year.
Granular urea remains tight on the world stage, with India returning to the market and the tender process beginning again. The actual requirement is unknown but many believe it could be greater than the previous purchase of 750,000 tonnes. If this becomes reality, urea will remain short for the coming months.
MOP is still expected to rise by a few euros early next week. UK stocks are lower following unseasonable demand over the last few weeks thanks to such good autumn conditions. TSP is unchanged week on week but, once current stocks are gone, the market will firm. Currency may well help a little but the main annual demand period is not far off.
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