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On Tuesday, the United States Department of Agriculture (USDA) published its July updates to its World Agricultural Supply and Demands Estimates (WASDE) report. Revisions were relatively mild but continued long liquidation on futures markets was encouraged by increases to production estimates and stocks for US wheat and corn, as well as cuts to world demand figures for each commodity resulting in a higher stock than the previous month.

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WHEAT

• USDA cuts demand and sinks markets

On Tuesday, the United States Department of Agriculture (USDA) published its July updates to its World Agricultural Supply and Demands Estimates (WASDE) report. Revisions were relatively mild but continued long liquidation on futures markets was encouraged by increases to production estimates and stocks for US wheat and corn, as well as cuts to world demand figures for each commodity resulting in a higher stock than the previous month.

World wheat demand is seen 1.8 million tonnes below last month's estimates, and at 784 million tonnes will be over six million tonnes less than last season. Stocks are seen 700,000 tonnes up on last month at 267.5 million tonnes, but it is important to remember this will be 12.5 million tonnes down on the year; not a bearish statistic.

For world corn, a reduction of one million tonnes in demand contributes to a 2.5-million-tonne increase in stock on last month to 312.5 million tonnes, which is just 700,000 tonnes up on last month. This coupled with a general commodity sell off with recession fears for world economies, saw the firm US dollar climb to parity with the euro and a rapid decline for crude oil prices below $100 per barrel. Chicago Board of Trade (CBOT) wheat futures are trading below the levels prevailing before the Russia-Ukraine conflict.

• Safe Ukraine export corridors?

Wheat markets found further selling pressure following news that Turkey, Russia, Ukraine and the United Nations were close to agreeing a process that would lead to re-establishing Ukraine's Black Sea exports. The Turkish defense minister stated that a deal would be signed next week, although a date has not yet been established.

• Adverse weather harming crop potential

While wheat prices have fallen this week, there is plenty of hot, dry weather impacting crop potential and therefore causing concern. Much of the European continent is suffering from a prolonged spell of extreme heat which is reducing the yield potential for grains; particularly non-irrigated corn which is in the pollination stage. The Spanish crop is seen 16% lower than last year at 3.57 million tonnes and in Germany, without substantial rain in the next two weeks the crop could fall below four million tonnes. This week analyst group Stratégie Grains cut its EU crop estimate by 1.8 million tonnes to 65.39 million tonnes, which would be 4.3 million tonnes below last year. It also cut its EU wheat production estimate again down to 123.3 million tonnes, now 6.5 million tonnes below last year.

US corn futures are finding support, with concerns that current hot, dry weather in the Midwest will result in yield losses. The Southern Hemisphere is faring no better, with drought in Argentina cutting the wheat area drilled to 5.9 million hectares and a crop estimate down to 17.7 million tonnes. This compares with 22.15 million tonnes last year which was a record, and is below Tuesday's USDA estimate of 19.5 million tonnes. 

BARLEY

• Feed barley harvest making rapid progress

With the recent hot and dry weather in the UK, harvest has started around 7 to 10 days earlier than last year. Moistures are averaging around 13% and bushel weights are averaging 67 kg/hl (up 3kg on last year). Most farmers are happy with their yields, which are higher than last year and up 5-10% on the long-term average. Prices are muted in the spot position as export sales remain modest and UK compounders have already bought old crop to cover their July needs. There are opportunities to achieve good sale prices outside of the harvest position for the autumn and winter months with prices £8-13/t; higher if it can be stored.

• Early cuts of malting varieties show good quality

We have seen samples of Craft and Electrum winter malting barley that are a significant improvement over the last couple of seasons. They have low- to mid-range nitrogen results, low screenings and high grain specific weight, which is ideal for maltsters and brewers. Samples of pre-Christmas sown spring malting types are also looking good. There is the chance that the main spring barley crop will have suffered in the recent dryness and heat, but it's hoped the impact will be minimal. Malting premiums are still high at £60-80/t but this will drop if sample results continue to impress.

​OILSEED RAPE

• Markets heading downwards

Markets have slumped by almost 25% in the past couple of months but are still 50% up on where they were this time last year. We are back to levels last seen in early March, when new crop values were finding new contract highs on an almost daily basis. However, it's a matter of perspective; they might be the same price levels but for producers they felt more positive in March than they do now.

• Neutral USDA report

There was hope this week that the USDA's July WASDE report might give the market a lift but its impact ultimately proved to be fairly neutral.

South American production numbers were left largely unchanged, apart from an increase of 600,000 tonnes to 44 million tonnes on Argentine soybeans. The main questions raised were on US soybean export numbers and likely US yields. This report lowered both the US new crop crush and export levels to counterbalance the drop in forecast production, following the reduction in acreage highlighted in the June plantings report. Given the high levels of forward sales, a drop in US exports feels unlikely and underpinning the whole analysis is the prediction of near-record soybean yields. However, given past weather and future forecasts, this also feels unlikely. As reality unfolds on these two issues, we could see buyers return in some style.

• Economic downturn looming

It's mainly 'in the macros' that any search should be made to explain the recent slump in oilseeds markets. Government policy on palm oil exports out of Indonesia - which supplies 55% of world trade in this commodity - started the reverse in prices, but all oilseeds have suffered from a combination of factors to do with the wider world economy. Fears are resurfacing over the outlook for China, amidst worries of further Covid-related lockdowns, and this week we've had confirmation that US inflation is at a 40-year high. Furthermore, there are ongoing concerns about what might happen to the European economy if Russia halts gas supplied in the coming months, with very real fears also building over the likelihood of a global recession or even depression. In terms of the potential impact, recessions last for months but a depression is defined as a drop in economic activity that lasts for years.

 PULSES

• Quiet UK market for peas and beans

Market activity remains quiet as we await harvest to help us assess yield and quality. There are some concerns that winter bean crops have ripened too quickly as a few have now turned black at least three weeks earlier than would normally be expected. Despite this, there are a lot of pods per plant, with three to five beans per pod and what appears to be minimal insect damage. Spring crops will suffer more in the intense heat and we do expect to see some yield reduction on poorer crops.

Peas are also ripening very quickly, with some ready to be harvested in the next ten days. Peas have come through an almost perfect growing season with the recent hot weather helping to ripen the crop quickly. Any rain now would only cause the pods to become opaque, resulting in the peas themselves being bleached. 

 FERTILISER

• Nitrogen/urea

Pressure remains on all European ammonium nitrate production facilities with higher natural gas levels. These increases caused domestic levels to move up by £100/t for spot deliveries (up £240/t since the start of new season on 12^th May). With higher gas prices forecast for the fourth quarter it's likely that prices will increase again if and when any forward UK-produced AN terms are offered. Imported prices are also reflecting this rise in energy costs but are very difficult to source for the UK market.

Urea markets have also firmed due to raw materials, plus exchange rates between UK sterling and the US dollar. The Indian tender has also had an impact; initially it was expected to be 1.4 million tonnes but it was only issued for 500,000 tonnes.

Growers are still advised to look at Sustain (treated urea) as it remains good value in comparison to straight AN alternatives and has the option to buy for a future delivery month.

• Liquid

Spring UAN terms are available but now volume is limited. Although much of the early momentum has gone from the market, the fundamental drivers are still in play. Locking into some forward certainty with UAN values and grades does give growers some comfort in the knowledge they have secured a known value and known product.

UAN terms are still available for the autumn tank fill position. Growers who haven't yet covered any volume should at least consider filling their tanks while physical offers are available for all nitrogen and nitrogen sulphur grades.

Any growers using liquid fertiliser (not including the OMEX N P grade) to establish oilseed rape this summer should include Limus Clear within this UAN application. With warm temperatures, exposed soils and low crop cover, this application is at high risk of volatilisation and Limus Clear can minimise any risk of nitrogen losses.

• Phosphate and potash

As phosphate and potash levels remain firm, growers looking for nutrients for drilling should consider Oilseed Start 24-24-0+8%So3 +boron from Frontier as a credible alternative to DAP, and for cereal requirements there's the option to omit the boron content: 24-24-0+8%So3.

Get in touch

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