Wheat futures prices have stabilised over the past week, sitting approximately 7% above their August lows. There is an increasing number of supporting elements to hold prices up, but nothing sufficient enough to move them on to another level yet.
Strong Russian and Ukraine exports dominate world trade and spot Russian wheat offers remain anchored at about $218/t FOB, failing to follow outside markets higher. The lack of rain and low soil moisture for drilling crop '25 is an additional watch for an extensive area covering Eastern Ukraine, Russia and Kazakhstan. Russian winter drilling is reported to be at its slowest pace since 2013 because of the dryness. According to the Ukraine Ministry of Agrarian Policy and Food, just 2% of Ukraine winter wheat area is planted due to record high temperatures and dryness.
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WHEAT
- Flat markets
Wheat futures prices have stabilised over the past week, sitting approximately 7% above their August lows. There is an increasing number of supporting elements to hold prices up, but nothing sufficient enough to move them on to another level yet.
Strong Russian and Ukraine exports dominate world trade and spot Russian wheat offers remain anchored at about $218/t FOB, failing to follow outside markets higher. The lack of rain and low soil moisture for drilling crop '25 is an additional watch for an extensive area covering Eastern Ukraine, Russia and Kazakhstan. Russian winter drilling is reported to be at its slowest pace since 2013 because of the dryness. According to the Ukraine Ministry of Agrarian Policy and Food, just 2% of Ukraine winter wheat area is planted due to record high temperatures and dryness.
Low soil moisture is also a potential issue in the US Plains, with winter wheat planting underway -although this is not impacting prices yet. The US winter wheat area in drought has increased to 52% and the highest of the calendar year so far. Winter wheat planting was only four points up on the week to 6%, with the trade expecting 8%, although this is in line with the average
- Lower Russian wheat estimates
This week another Russian wheat crop production estimate from Russia's agriculture consultancy, IKAR, was revised lower and seemed to be the catalyst to rally Chicago Board of Trade (CBOT) wheat futures prices. At 82.2 million tonnes, this is lower than other recent estimates, leaving an exportable surplus of 44 million tonnes. The United States Department of Agriculture (USDA) estimated an 83 million tonne crop in August and an export surplus of 48 million tonnes. We may see the USDA make these adjustments in the September World Agricultural Supply Demands Estimate (WASDE) this Thursday.
Analysts SovEcon estimate Russian August wheat exports at 5.7 million tonnes, up from 5.3 million tonnes last year and 3.6 million tonnes in July. Forward Russian prices have a carry, however, lower Russian crop estimates and export availability should reduce the flow of nearby cheap wheat in due course. If Russian wheat exports top 14 million tonnes by the end of September that could leave only 30 million tonnes left for the remaining nine months of the season. Russian wheat prices may rise to stall demand, or supplies could run dry leaving strong end of season demand for EU wheat.
The Ukraine Ministry of Agrarian Policy and Food adjusted its wheat production estimate to 21.9 million tonnes from 21.8 million tonnes previously, whilst the USDA are at 21.6 million tonnes. Leading agribusiness consulting agency, APK-Inform, see the wheat exportable surplus at 13.8 million tonnes, up from 13.4 million tonnes previously, with the USDA already at 14 million tonnes.
The USDA may potentially increase Australian production and exports to help offset Russian reductions.
- US versus EU wheat exports
Last week's US wheat export sales were only just above the bottom end of trade estimates, at 340,000 tonnes, although the cumulative pace is encouraging, running over 30% ahead of last year.
Meanwhile, EU weekly wheat exports increased by only a modest 345,000 tonnes, up to 4.822 million tonnes versus 6.249 million tonnes last year. The slower pace is the result of high prices (well above Russian prices) leaving it difficult to justify further notable price gains at this stage.
Nigeria leads the list of EU wheat receivers with 654,000 tonnes, followed by Egypt, Morocco, Algeria and then the UK, with 322,000 tonnes so far. UK domestic prices continue to reflect the cost of these imported milling and feed wheat supplies. The small UK crop - over three million tonnes down on the year - leaves farmer selling at a slow pace, which is not helped by low protein and admixture issues. Immediate delivery prices for some grades are as good for September as they are for any position before the new year.
BARLEY
- Feed barley prices firm a little more
Demand for feed barley for domestic feed mills continues at a £16-18/t discount to wheat, with sales being made as far forward as April next year. Farmers have increased the selling pace recently, as those who need to move malting barley in the next couple of months conclude that the small malting premium available is not worth the risk of rejection at maltings. Export feed barley trade hasn't happened for months and is unlikely to do so until Easter.
- Malting market quiet with very few trades
Demand is lacking for the moment but so is the supply from farm of malting barley. Malsters await brewers buying more and farmers await more attractive premiums. Meanwhile - as described above - parcels of spring barley are now ending up in feed mills daily. If it happens to a large enough extent we may well see malting premiums pick-up in England after Christmas.
- Scottish spring barley growers await more combining weather
The weather in Scotland has been unhelpful over the last week and little to no progress has been made. The Borders region is approximately 40% cut, Fife / Angus 30% and 20% in Aberdeenshire. If the forecast doesn't start to clear in a week or so, barley quality will start to deteriorate. Fortunately, much was sown in April, so not all crops are ready just yet. Where possible, growers will be cutting at the earliest opportunity, even if the moisture is around 20%, though the merchant supply chain is used to these circumstances every now and then.
OILSEED RAPE
Rapeseed values have stagnated in the last week, in-line with other oilseed values. This is due to a competing mix of low demand going forward, dry weather in Brazil impacting planting pace and lower European rapeseed area for this autumn, which is leaving the market looking for direction.
The weather, combined with lower rapeseed values, has been the main driver for declining European rapeseed plantings. Ukraine in particular has seen extremely dry conditions, hindering its ability to sow rapeseed. This can also be said for Brazil, which is having similar issues, but it has a longer planting window, with time still to catch up.
PULSES
Poor weather has put a hold on the bean harvest this week, with a large area left to combine. Values for feed beans continue to trade at around £45/t premium to wheat, with increased competition from other mid-range protein sources aided by the falling price in soymeal continuing to limit demand from domestic feed compounders. Supply forecasts have been revised this week with a huge range in predictions from 500,000 tonnes up to over 600,000 tonnes, this uncertainty is putting an interesting complexion on market direction.
Green peas suitable for micronising continue to trade around £370 ex, with more recent samples having higher levels of bleaching.
FERTILISER
- AN/Urea
Any chances of a decrease in summer energy prices seem to be slipping away as the days get shorter and mornings colder. The UK's AN producer is very vigilant of gas/ammonia prices and historically quarter four prices are higher than quarter three. Currently, only ammonia is used in the AN production process by the UK manufacturer - this still feels like the right decision given the volatility in the gas market.
Either way, any chances of cheaper AN seem to be falling away as urea prices have also firmed on the back of India buying 1.2 million tonnes from the world market last week. This has certainly reduced the chances of producers lowering offers given their order books are now full for the next few weeks. With the low demand from Europe, due to lower harvest hectares, it all now depends on sowing areas and the weather over the coming weeks. With favourable conditions, demand will return in quarter four from Europe and the UK, but much later than normal. Many industry commentators are saying now is the time to cover AN as prices will follow world urea upwards.
- Liquid
Despite the UK market seeing an increase in urea values in the last week and a continued firm outlook on nitrate products, UAN terms remain unchanged at present but volumes are limited. The current UAN pricing structure continues to offer growers very competitive terms versus alternative AN based systems across a full portfolio of nitrogen and nitrogen sulphur grades.
Growers with storage capacity for autumn and a known requirement for the spring are encouraged to commit to a percentage of their total required volume for the coming season. Growers looking to discuss existing UAN programmes, or a switch to a liquid system, should contact their Frontier representative to discuss the options available.
- PKs/Straights
It feels like potash/phosphates are going to trade in a narrow spread for the next few months, due to current market conditions and an absence of any major world issues. Significant demand will come eventually and will likely move levels upwards given the low stocks in the UK. Replacement values are higher on phosphates but very little change on potash.
Recent grain nitrogen results suggest soils will start the new cropping season with very little residual nitrogen. The weather over the last 12-months will also have depleted potash levels - depending on the soil type - and phosphates will have run off the land as well in lots of areas. Please consider soil sampling to check what effect the rain has had and as always speak to your Frontier contact for more information.
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