WHEAT
- USDA highlights US corn crop woes
In their June World Supply and Demand Report published this week the United States Department of Agriculture (USDA) highlighted the impact of the delayed US corn planting as farmers continued their battle against ongoing heavy rain.
Due to the adverse weather conditions, US farmers are predicted to plant 3 million acres less than estimates given in the USDA's May report. However, this would still be 700,000 acres above last year. The difficult conditions also led the USDA to cut the expected yield from 176 to 166 bushels per acre. The net effect is a US crop 34 million tonnes lower than previously thought and 19 million tonnes lower than last year.
Many still view the USDA cuts as optimistic, as up to 6 million acres could remain unplanted. With the US being the world's largest corn producer, traders will be watching crop prospects there closely. The speculative funds have been very active amidst this scenario, helping to pull corn and wheat prices higher. They have bought back their near 350,000 contract short position which they held in early May and are now thought to be as much as 200,000 contracts long.
- Record world wheat crop beacons
While the USDA made severe cuts to world corn production and stocks, they see a contrasting picture for world wheat. With modest increases for the US, India, Russia and Ukraine in their May report, they see the world producing a record crop of almost 781 million tonnes; a jump of 49 million tonnes compared to last year. This would lead to a record stock level of 294 million tonnes and therefore offer a bearish outlook for wheat alone.
- UK wheat production set to jump
This week, the Agriculture and Horticulture Development Board (AHDB) looked at the UK 2019 wheat harvest prospects and put the crop potential at 15 million tonnes, which is up 1.5 million tonnes compared to the previous year. Achieving this tonnage will have been helped by the significant rainfall seen across the country this week. However, the timing of this rain during and close to the flowering period also raises concerns for mycotoxin risk in quality crops. With the UK set to produce an exportable surplus well above 1 million tonnes, this is a very unwelcome prospect. The 2019/20 UK wheat market will need to adjust to compete for export business and target quality destinations in North Africa, which will help maintain prices rather than having to battle in the feed grain market.
BARLEY
- Malting barley trade falls
This week the malting barley has been dominated by the weather. Some parts of East Anglia and the Midlands received over 100mm of rain in the week. While it was very welcome in most areas, now crops require both sunshine and heat to reach their potential. Some of the heavier crops of winter and spring barley did go flat in areas of heavy rain.
The malting barley market has fallen in the last week with domestic UK buyers absent and the uncertainties around Brexit and its impact on the UK's malting barley export campaign still far from clear. Premiums remain at attractive levels but could come under pressure if buyers remain absent and more sellers enter the market as we approach harvest.
- Limited market opportunities
The old crop feed barley market remains sporadic, with buyers trying to predict when harvest will commence and the discounted new crop barley will be available to the market. Market opportunities are limited and we would advise that any unsold feed barley balances are discussed with your Farm Trader to find the best home and value, when opportunities to sell arise.
OILSEED RAPE
- USDA report
Domestic markets have spent the majority of the week unchanged but are finishing at a strong position due to further weather difficulties in the US. Tuesday's World Supply and Demand Estimates Report from the USDA had little impact on the market, despite the US yield and production figures being higher than market expectations. The lack of reaction was because forward forecasts continue to give little reassurance that the balance of the bean crop can be planted soon and in good order. Wet weather is set to return to the Midwest this weekend and another system early next week is forecast to give between 1.5 to 3 inches of rain onto most of the key bean growing states. Time is running out and the market now sees a significant drop in potential yield from these late sown acres and reduced scope for farmers to switch out of corn and into beans. There was limited excitement from the world outlook on oilseeds contained within the USDA report. No changes were made to the Argentine and Brazilian soybean crops and 2019/20 year end bean stocks were marked marginally lower from 113.09 million tonnes in the May report, down to 112.66 million tonnes.
- Currencies
The other key factor that has been acting to support the UK market in the past few weeks has been the weakness in Sterling. Since the start of May the Pound has depreciated by over 4% against the euro which has supported domestic OSR prices by up to £15 per tonne.
FERTILISER
- New Season fertiliser
The new season fertiliser campaign started this week, as anticipated CF's first offer was around £30 higher than last year. This was widely anticipated given the level that the European market started, continued pressure on currency and the fundamentals of the underlying granular urea markets.
There has been good uptake from farmers to CF's first offer and other suppliers responded quickly meaning that trade has been brisk, despite the campaign starting in Cereals Week.
Deliveries have already started and growers are reminded that they need to be in a position to take the product in the period agreed in order to avoid any potential additional costs.
The first offer has now closed and the second offer has seen a £5 increase in the price of nitrogen whilst sulphur grades have seen little or no change. Import activity has picked up but there is still uncertainty surrounding how much physical product will be available.
- Granular urea
Recent news from the Gulf and the effect on the key shipping lanes which transport urea as well as oil, means that further strengthening of the urea market is expected. This will further underpin the early offer for new season fertiliser and we recommend talking to your Frontier contact for current offers.
- Multi N
The recent rains will have supported crop yield and the potential for yield dilution of protein levels. This may be a concern for milling wheat growers who could consider using a rain fast foliar product such as Multi N, which becomes rainfast in 30 minutes.
- DAP fertiliser
With an eye on establishing the next crop, DAP fertiliser prices are currently looking good value and those growers looking to optimise establishment of Oilseed Rape should get in touch to discuss requirements.
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