Geopolitical issues triggered spells of speculative short covering in futures markets this week. Trader concerns over the wider repercussions of a potential retaliation by Israel against Iran increased crude oil prices by over 3% on Monday to over $80/t, its highest since 19th July. This had a positive impact on other commodity markets, including wheat.
Away from the tensions in the Middle East, Russian missile strikes on two Ukrainian Black Sea ports, including Odessa, resulted in damage to grain carrying vessels - another reminder of the potential risk around shipping from the world's cheapest wheat source.
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WHEAT
- Conflict spooks shorts
Geopolitical issues triggered spells of speculative short covering in futures markets this week. Trader concerns over the wider repercussions of a potential retaliation by Israel against Iran increased crude oil prices by over 3% on Monday to over $80/t, its highest since 19th July. This had a positive impact on other commodity markets, including wheat.
Away from the tensions in the Middle East, Russian missile strikes on two Ukrainian Black Sea ports, including Odessa, resulted in damage to grain carrying vessels - another reminder of the potential risk around shipping from the world's cheapest wheat source.
- Wheat planting powers ahead
Concerns for 2025 Black Sea wheat supplies have added support to futures markets in recent days. Prolonged dryness and above normal temperatures in Eastern Ukraine and Southern Russia suggested a notable cut in the overall Ukrainian wheat area and Russia was said to be planting at its slowest pace in 11 years.
55% of Ukraine's winter wheat crop had seen less than half of the normal 30-day rainfall accumulation and for Russia that extended to 80%. However, updates this week present a more positive outlook, with Ukraine's winter planting now put at 55% - 2.62 million hectares of this is wheat and is ahead of the 2.35 million hectares planted in the same period last year.
The Ministry of Agriculture of the Russian Federation said winter planting has reached 13 million acres so far against a target of 49.4 million acres, which is in-line with last year.
- Strong Black Sea exports
Black Sea wheat supplies continue to dominate international trade and will supply the wheat bought by two of the world's largest wheat importers. Saudi Arabia purchased just over 300,000 tonnes and Algeria reportedly bought over half a million tonnes, all of which is expected to come from Ukraine and Russia.
France has historically been the primary wheat supplier to Algeria, however, it was excluded from submitting an offer in this tender. Had the country been able - with prices $20/t or more away from being competitive – it's unlikely that sales would have been secured.
Ukraine wheat exports now top 6.5 million tonnes and Russia is expected to ship five million tonnes this month.
Latest Brussels trade data does little to boost optimism for EU wheat exports, which were up just 216,000 tonnes on the week to 6.354 million tonnes compared to 8.902 million tonnes last year.
The UK remains fifth on the list, taking 23,000 tonnes in the week. There were zero shipments to traditional export homes Egypt, Morocco and Algeria.
- Encouraging US crop prospects
Despite the trail of destruction left by hurricanes impacting the eastern US states, prospects for US corn and 2025 winter wheat look positive.
Corn harvesting advanced nine points on the week to 30% complete and compares well with a 27% average, the trade expected 34%. The remaining crop condition is stable at 64% rated 'good/excellent', 11 points ahead of last year. Winter wheat planting reached 51% complete, 12 points up on the week and just one point down on average.
This Friday afternoon, the United States Department Agriculture (USDA) is expected to make changes to US production estimates in its October World Agricultural Supply and Demand Estimate (WASDE) report.
BARLEY
- Good two way trade in feed barley
Over the last week, growers have continued to sell tonnages of feed barley and are venturing into the post-Christmas positions as they are relatively attractive prices for growers to sell.
Discounts to wheat vary from around £30/t in the North and Northwest England to £25/t in Devon. The Scottish feed barley market is slow as feed compounders follow a more 'spot buying' pattern. Tonnages from farm have found willing buyers due to this discount.
- UK feed compounder trade up
Latest figures show that tonnages for feed barley demand levels so far this marketing year are slightly up on last year's poorer volumes. This is largely due to a rebound in the poultry sector which had suffered from farms de-stocking due to poor margins in the year before. There's also strong demand for beef and other meat products.
- Malting barley premiums remain low
Stagnant demand from the drinks industry means that malting barley premiums have been under considerable pressure, as such growers are selling their malting barley as feed, particularly where the prices of feed barley are strongest.
There's an oversupply of low nitrogen barley which is making it difficult to find export markets. This takes away some of the immediate demand and adds pressure to the already reduced premiums. These factors will eventually result in a smaller UK exportable malting barley surplus. Ironically, any problems with the crop '25 spring barley growing season could see buyers come back for the good quality UK crop '24 supplies. However, we have some time before this can be determined.
OILSEED RAPE
- Rapeseed values increase
There have been further tensions in the Middle East which caused a spike in crude oil values, assisting vegetable oils to also trade higher and allowing crushers to pay higher values for oilseeds. This adds to tightness on the supply side for European vegetable oils, as so far this season imports have been relatively low.
This week, English ex-farm levels touched £400/t which encouraged some farm selling. In the UK, rapeseed plantings are nearing completion, with another setback in total area looking likely.
Brazilian rainfall remains the key watch point in soybean markets, as main weather models disagree about the coming forecast which may or may not enable plantings to continue.
In Asia and South America, biodiesel usage levels continue to increase with large production capacity coming online soon in Brazil.
PULSES
- Bean harvest nearing completion despite poor weather slowing progress
This week has seen an increase in demand for feed beans as their prices have become more competitive compared to other mid-range protein alternatives, driven by rising rapeseed meal values.
Meanwhile, demand for UK spring human consumption beans remains strong due to the high levels of bruchid damaged Baltic beans.
- Green peas
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 live and you can contact to your Frontier representative to discuss options.
FERTILISER
- Urea/AN
Urea markets have continued their upward trend, with urea alone increasing by $45/t since last week's report.
The recent Indian tender has also received fewer physical offers than expected, which could indicate further tightness on global supply and increased freight costs.
50% of world urea production is from North Africa and the Middle East, and with possible new sanctions being imposed on Iranian product, producers will be feeling bullish given the importance of Iranian production to global trade figures.
Ammonia remains firm, with no downside being spoken of in the trade.
UK domestic nitrogen remains very competitive against European imports and given the firmness in urea and ammonia, an increase in pricing is expected later this week and into the next.
- UAN/liquid
UAN suppliers are currently out of the market pending a review and indications suggest that they will not return until next week whilst they take stock of replacement costs coming into the UK.
If you're yet to buy, we recommend finalising your cropping requirements and placing an order at the next available opportunity.
- PKs/straights
There has been a slight increase in the amount of autumn and spring grades being purchased this week, especially in regions where crop establishment is close to being completed.
Phosphates look to have peaked, with supply starting to push through into the market.
Potash has weakened to levels that should now gain some interest and given both phosphates and potash are at annual lows, margin returns will be improved to optimise yields going into the 2025 season.
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