- Weather and trade underpin EU wheat markets
This week French wheat futures rallied to highs not seen since mid July. The strong EU export pace continued to progress and has now reached 10.77 million tonnes – 3.7 million tonnes ahead of last year. Slow farmer selling and ongoing wet weather conditions which are delaying the French corn harvest and winter wheat planting are both contributing factors to the rise in wheat prices. However, the French are still enjoying more favourable planting conditions than we are in the UK. By 25th November, wheat drilling in France had advanced 6 points during the week to 80% complete, but the crop condition fell 3 points during the week to 75% rated 'good' to 'excellent'. The French had all but completed their winter wheat drilling by this time last year.
- UK markets tread water
UK wheat prices moved sideways this week as old crop exports stalled and weather prospects appeared to improve. Forecasts for a prolonged cold and dry period, as we head into the meteorological winter period, provided some hope that a return to field work may at some stage be possible. The Environment Agency said that England had received 143% of the long-term average rainfall between August and October, highlighting the reasons for the delayed winter wheat planting so far.
The Agriculture and Horticulture Development Board (AHDB) published their 'Early Bird Survey' which asked farmers for their planting intentions. This understandably may not be achievable. However, the survey notes a 9% drop on the winter wheat area on last year to 1.65 million hectares – its lowest since 2013. With only about half the wheat drilled so far, the late planting for the remainder will likely deliver lower yields. In 2013, yields reached only 7.4t/ha following the wet autumn. If this is the case for 2020, the UK 2020 wheat crop might only amount to 12 million tones. With a domestic demand of almost 15 million tonnes, there is a significant gap to fill to ensure sufficient grain is available.
- DEFRA publish their first official 2019/20 balance sheet
The Department for Environment, Food and Rural Affairs (DEFRA) published their first official UK wheat balance sheet for this season. It showed that resulting from a hefty 16.283 million tonnes crop will be a surplus of 4.529 million tonnes for export or carry over to next season. Under normal circumstances, DEFRA expect the commercial carry out to be 1.550 million tones, leaving a balance of 2.979 million tonnes for export. With possibly 900,000 tonnes shipped by Christmas and UK prices no longer competitive in export markets, there is over 2 million tonnes of old crop wheat that needs to be shipped or rolled over to next season. With a gap to fill in the 2020/21 balance sheet, carrying more wheat to next season is likely, but the market dynamics have to adjust to allow this to happen.
- Russian wheat production lowered
The Ministry of Agriculture of the Russian Federation lowered their 2019 wheat crop production estimate from 78 to 75 million tonnes this week; a change that in certain circumstances could have a significant price impact. However, with the United States Department of Agriculture (USDA) already lower at 74 million tonnes, there was no tangible market reaction.
- Wet weather sees rise in feed compounder interest
The week the market has seen an increase in compound activity and additional interest in ports. The additional demand is a result of the continued wet weather and questions over the quality of the maize silage that has been made this year. This is mostly from the ruminant sector, with interest shown for December to February delivery. It also represents a £20/t discount to wheat.
Recent and current barley loadings in the main UK ports have been to Saudi Arabia, Tunisia and Morocco. This is keeping the sales of our surplus ticking over. The UK is still very competitive in comparison to EU and world markets and when demand returns should see some more of the action.
- AHDB Early Bird Survey points to another big crop for 2020
With a reduction in winter sowings counteracted by a 20% rise in spring sowings, the UK is potentially heading for a crop of 8 million tonnes according to the survey. The amount is similar to that of this year. However, much will depend on the wheat sowings between now and the end of January. Spring barley yields can significantly vary from year to year. For example, crop 2018 and crop 2019 yields varied by 15 – 20%. Barley prices for 2020 are already well below wheat, and with the upcoming election, the value of sterling may be quite volatile. A cautious marketing approach should be considered.
- MATIF rapeseed futures prove profitable
MATIF rapeseed futures traded substantially lower on Monday and have somewhat recovered as the week has gone on. With market highs on MATIF futures being reached last Wednesday, and a trade that is outright bullish, it was perhaps not surprising that we saw some profit-taking occur.
- Weather conditions affect Canadian and Australian harvests
The Canadian harvest continues to struggle on with some analysts reporting that 5-10% of the area still to be harvested is under snow and may not be accessible until spring. In Australia, the harvest is moving to 55-60% complete in vastly different conditions to Canada. Australia continues to be hot and dry in most states.
- US soybean markets under threat
There doesn't seem to be any good news for US soybean markets. The trade negotiations with China appear to be going backwards with Trump signing the 'Hong Kong' bill into US legislation. The Chinese reaction has been less than favourable and, although the US markets are currently closed for the Thanksgiving holiday, it would not be surprising to see US soy futures markets open lower.
- Drop in demand for rapeseed oil
Demand for rapeseed oil continues to come under pressure with processers switching to cheaper and more readily available sources of sunseed and soy oil as replacements.
- No movement in feed bean values
Feed bean values remain static as shipper shorts still need to cover nearby positions. In theory, the market is still oversupplied with many beans having failed to make human consumption, so the feed bean heap is growing. We expect that with no new demand, values of feed beans will fall as we get into the new calendar year.
- Green peas rise in value
Values for green peas have risen this week as there is limited availability of strong coloured green peas. We still have ongoing demand for green peas into the UK and also for export to China and the Far East, although further price rises are limited by the recent strength of sterling. Please contact your local Frontier farm trader if you have any peas or beans on farm that require sampling.
Markets are generally quiet following the recent large tender for Indian granular urea. Some trade was completed from North Africa to European markets and Free On Board (FOB) values have strengthened slightly on the back of this.
As we get closer to the post Christmas period and the start of fertiliser application, importers – of both urea and ammonium nitrate – will become more nervous; especially as we still have the general election and a possible Brexit deadline at the end of January to contend with. The outcome of both of these could have a significant impact on fertiliser prices in the UK market. Our advice is to book remaining requirements now to ensure prompt delivery and fix prices at today's levels.
- PK & NPKs
With a potentially larger area of spring crops being grown on many farms this year, consideration should be taken as to which products provide the most flexibility come the spring. Many of the NPK +S compounds fit this requirement very well.
PK and NPK prices are fluctuating at the moment depending on stock levels and raw material costs at the various blender locations across the country. There are some good offers available so talk to your Frontier contact for more details.
Alongside its divisions, SOYL and Kings, Frontier is hosting a series of 17 winter training events. Open to all farmers interested in learning more about the use of digital technology to improve crop production performance, the events will include valuable insight into MyFarm and its role as a complete farm management platform.
You can find your local event and book your place by visiting our website.