The United States Department of Agriculture (USDA) published its October World Agricultural Supply and Demand Estimates (WASDE) report last Friday but presented no bullish surprises which contributed to a softer spell for world wheat prices.
Minor cuts in production for Brazil, the EU, India and Russia, partly offset by increases for Ukraine, sees world production down 2.8 million tonnes on the previous estimate to a total of 794.08 million tonnes. However, this is still almost four million tonnes up on last year.
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WHEAT
- Little fresh from the USDA
The United States Department of Agriculture (USDA) published its October World Agricultural Supply and Demand Estimates (WASDE) report last Friday but presented no bullish surprises which contributed to a softer spell for world wheat prices.
Minor cuts in production for Brazil, the EU, India and Russia, partly offset by increases for Ukraine, sees world production down 2.8 million tonnes on the previous estimate to a total of 794.08 million tonnes. However, this is still almost four million tonnes up on last year.
An additional carry-in stock of about one million tonnes and a 2.3-million-tonne cut in consumption leaves end stocks half a million tonnes higher than the previous report. For the bulls, world stocks are still 8.4 million tonnes lower on the year and the major exporter stocks - including the US - are down 6.17 million tonnes on the year.
The USDA world corn balance sheet offered mild support with small cuts on previous estimates for Russia and Ukraine, offset in part by increases for the US which sees world production down 1.4 million tonnes to a total of 1.217 billion tonnes.
There is now a three-million-tonne increase to the carry-in stock for this season. This makes up for a 3.5-million-tonne increase in consumption which rose to a record 1.223 billion tonnes and leaves end stocks just 1.8 million tonnes lower than last month at a total of 306.52 million tonnes.
Wheat futures markets softened following the report, contributing to the negativity and lower prices we have seen this week.
- Russia calms the bulls
The Ministry of Agriculture of the Russian Federation had called wheat exporters to a meeting last Friday to discuss concerns that too much wheat had been shipped too quickly.
Speculative shorts in futures markets were concerned that a curb on future Russian wheat export sales could be introduced and actively covered their positions which drove prices higher.
So far this season, on average Russia has been shipping one million tonnes of wheat each week and a restriction on the remaining volume available to world markets could have been explosive for prices.
Persistent dryness across southern Russia, the main wheat producing region, added to the potential bullish mix because of concerns for 2025 output. Rather than limit shipping volumes, the Ministry of Agriculture of the Russian Federation recommended a new minimum export price of $250/t FOB which is around $35/t above the lowest sales values seen from Russia at harvest.
This recommendation wasn't effective as sellers took the initiative again and wheat futures slipped lower.
- Trouble spots see rain
Much of Ukraine and southern Russia have endured persistent dryness and above normal temperatures during the late summer and autumn, raising fears for winter drilling and the 2025 wheat output.
However, much of the troubled area has now seen rain - some of it significant - and drilling is pushing ahead. The Ministry of Agriculture of the Russian Federation said it expected the country's winter grain area to reach 20 million hectares, in line with last year. In Ukraine, winter wheat drilling has reached around 75% complete.
Argentina is suffering with fears of dry weather and production issues for this season's wheat but the country set for some beneficial rain.
In France, just 6% of the winter wheat had been drilled with wet conditions setting all-time records. Prospects for 2025 look potentially more challenging than they were last autumn.
UK farmers continue to battle intermittent rain and the planting troubles from last autumn have now been highlighted by the Department for Environment Food and Rural Affairs (Defra) - the first official English wheat production estimate is 9.99 million tonnes, down from 12.757 million tonnes the previous year. With the other home nations added, the UK crop falls at about 11 million tonnes which aligns with most credible trade estimates.
BARLEY
- AHDB crop '24 production estimates - winter is down, spring is up
The Agriculture and Horticulture Development Board (AHDB) has released UK crop production estimates for 2024.
Lower yields on winter barley have resulted in a total production figure of 7.2 million tonnes. This figure is around 4% more than the previous year's figure and considering that 5% more of the total barley area was planted, the scale of the winter barley yield underperformance becomes more obvious.
Following the poor winter sowing season, spring malting barley production was up over 25% this year to 4.76 million tonnes, marking the biggest spring crop for six years. UK winter barley production was down 24% in comparison to the previous year. However, Scotland saw a small increase in winter barley production in crop '24 versus crop '23.
- Spring barley more export competitive than winter barley
The above results go a long way in explaining why this year has been unusual in the UK export market. So far this season, only 75,000 tonnes of barley has been exported and 80% of the tonnage is still unsold. Poor domestic spring barley premiums - due to increased supply and good quality - have had the effect of making malting barley more competitive in the export market versus feed barley.
OILSEED RAPE
- Rapeseed values capped out
In the short term, values in much of England have touched the £400ex farm level.
Tensions in the Middle East have continued to offer support for crude oil values and in turn the biodiesel market in Europe which adds to a relatively tight vegetable oil supply situation. Despite this, value increases have been halted as soybean markets have reacted to increased rains in Brazil which will aid the country's planting progress in what is set to be a large crop - this adds to the big US crop recently harvested. The market will have to weigh up what premiums rapeseed and sunflower oil can sustain over soybean oil.
Currently, fieldwork is proving tricky in parts of Europe, but the trade expects a bigger rapeseed crop for harvest 2025. This is mainly based on better yields versus the relatively low ones of this year - crop '25 currently trades at a discount to crop '24.
PULSES
- Domestic demand continues
As mentioned in last week's report, domestic demand for feed beans continues to strengthen as the price has become increasingly competitive into animal feed rations against other mid-range protein sources, supported by rising rapeseed meal values.
In contrast, export demand remains subdued as Baltic feed beans are being offered at a $15/t discount due to most beans from the region only meeting feed-grade specifications. However, this poor quality crop from the Baltics has meant buyers have returned to buy UK human consumption beans.
Green peas continue to trade at around £370/t ex farm with ample supply, as many samples have been harvested with limited levels of bleaching. Crop '25 green pea contracts are now also available.
FERTILISER
- Urea/AN
The urea market has become relatively settled in pricing following last week's significant increase. The new levels for Egyptian, European and UK urea are comparable. Pricing is still dependent upon possible sanctions and ongoing conflict in the Middle East.
The October to November offer on UK AN has now been withdrawn and replaced with a December to January offer. This AN market still hasn't stepped up, even though ammonia remains high and firm. Nevertheless, AN is only £10-20/t over May 2024 levels.
Given the offer window now puts movement into early 2025, any UK AN buyers should consider covering product to avoid delays on application in the spring.
There has been no change from the multiple imported AN options which is of no surprise as they were already considered carrying a premium over UK AN.
With ammonia remaining high and gas above predicted levels for quarter four, all AN producers will be keeping a close eye on their forward order book and the cost effectiveness of production.
This could mean that if demand slows or doesn't pick up, all EU producers will continue to curtail production capacity. This means potential tightness of supply going into quarter one of 2025.
- UAN/liquid
Liquid suppliers have re-entered the market following a high level of activity in early October. All grades appear to now be up by £10-15/t, which remains competitive versus a solid N/S system.
In addition to this, NP and NPK grades are now getting fixed for spring delivery into maize, potatoes, grassland and vegetable growers.
- PKs/straights
Following last week's reports of potassium weakness, we have seen NPK buyers come to the market to look at pre and post-Christmas delivery.
There is a concern around NPK compound availability as importers need to ensure demand is there before committing to bringing in vessels. If you are committed on using NPK compound in any form, consider looking at options pre/post-Christmas.
No change to report on phosphates, the only consideration might be for larger volume DAP buyers. With ammonia remaining high, this will keep DAP pricing higher so it's worth calculating DAP volume required and spread out your buying between now and spring usage.
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