Last Friday, the United States Department of Agriculture (USDA) published its first grain balance sheet estimates for next season.
World wheat production is seen higher by 10.5 million tonnes on the year to a total of 798.19 million tonnes, but corn will be lower by eight million tonnes to a total of 1.22 billion tonnes. Increases in consumption for both wheat and corn see stocks falling by 4.2 million tonnes and 800,000 tonnes respectively by the end of next season.
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WHEAT
- USDA first look at 2024-25
Last Friday, the United States Department of Agriculture (USDA) published its first grain balance sheet estimates for next season.
World wheat production is seen higher by 10.5 million tonnes on the year to a total of 798.19 million tonnes, but corn will be lower by eight million tonnes to a total of 1.22 billion tonnes. Increases in consumption for both wheat and corn see stocks falling by 4.2 million tonnes and 800,000 tonnes respectively by the end of next season.
Behind the headline numbers, the bullish dynamic for wheat is the projected fall in stocks (around five million tonnes) for the world's major exporters. The US and Canada will see stocks rising by two million tonnes and 600,000 tonnes respectively, but Argentina, Australia, the EU, Russia and Ukraine will all see their stocks fall.
The USDA expects Russia to export 52 million tonnes of wheat and it was that level which had the most damaging impact on prices this season. Ukraine has less wheat to ship, but this season Spain - a major importer of Ukraine wheat - is expecting a large harvest and will not take what it took previously.
The USDA EU production estimate is probably three million tonnes too high, having predicted French production at 33 million tonnes when other analysists suggest about 30 million tonnes.
- Russian production fears rally wheat futures
Following a prolonged period of dryness, spells of abnormal heat and latterly frosts across many regions of southern Russia, analysts have made cuts to Russian 2024 wheat production.
The threats to future supplies from Russia have triggered continued short covering by managed money funds who are holding short positions in Chicago Board of Trade (CBOT) wheat futures. This has driven futures markets to multi-month highs.
Last week, the USDA estimated that Russian wheat production would reach 88 million tonnes - already 3.5 million tonnes down on last harvest. However, this week private analyst, IKAR, cut estimates to 86 million tonnes from its previous estimate of 91 million tonnes. IKAR also reduced its Russian wheat export estimate by 3.5 million tonnes to 47 million tonnes, which is five million tonnes below the USDA. SovEcon went further, reducing its estimate to 85.7 million tonnes.
London wheat futures followed other world markets and rallied to their highest since the beginning of January 2023. Russian weather is now a keen watch and the country's wheat production prospects are key to driving world wheat prices in the coming weeks.
- US wheat in good shape
In contrast to the Black Sea region, US wheat production estimates are encouraging as the crops have enjoyed a more balanced weather pattern in recent weeks.
The US weekly crop progress report left the winter wheat condition unchanged at 50% rated 'good/excellent' and although the trade were a point more optimistic, the crop is well ahead of last year at 29%. Spring wheat planting moved 14 points ahead at 61% planted and although two points behind trade expectations, this is well ahead of both last year's 35% and 48% average.
Corn planting at 49% is in line with expectations and up 13 points on the week, but still behind last year's 60% and 54% average.
This week, the Wheat Quality Council Tour was held in the primary winter wheat producing state, Kansas. On day one the group found favourable yield potential - 49.9 bushels per acre in the northern part of the state. This is well ahead of last year - 29.9 bushels per acre and an average of 42.7.
- Barley discount to wheat continues to widen
As with last week, we've seen a continuation of increased farm selling while futures markets sustained their steep uptrend. This pulled up feed barley prices as well, albeit not one for one.
This has widened barley's discount to wheat which now sits closer to the £30/t mark. As the discount has widened there has been some old crop consumer demand, centred mainly in Lincolnshire and Yorkshire. This demand, along with barley becoming cheaper relative to wheat, has supported old crop prices this week.
- Consumers more focused on old crop
New crop prices have been influenced by moves in the futures markets for lack of physical barley trade and have experienced volatility.
New crop farm selling has started to come forward as prices have risen and rain is forecast throughout the UK which will help new crop barley achieve its yield potential.
Consumer demand for new crop was muted until the middle of the week when markets entered a period of correction - some limited cover was sought, particularly around the September position.
After such a rally in futures, buyers will now be focused on weather and yields. Favourable pre-harvest conditions will likely cause them to hold out as they wait for prices to come back down.
BARLEY
- Barley discount to wheat continues to widen
As with last week, we've seen a continuation of increased farm selling while futures markets sustained their steep uptrend. This pulled up feed barley prices as well, albeit not one for one.
This has widened barley's discount to wheat which now sits closer to the £30/t mark. As the discount has widened there has been some old crop consumer demand, centred mainly in Lincolnshire and Yorkshire. This demand, along with barley becoming cheaper relative to wheat, has supported old crop prices this week.
- Consumers more focused on old crop
New crop prices have been influenced by moves in the futures markets for lack of physical barley trade and have experienced volatility.
New crop farm selling has started to come forward as prices have risen and rain is forecast throughout the UK which will help new crop barley achieve its yield potential.
Consumer demand for new crop was muted until the middle of the week when markets entered a period of correction - some limited cover was sought, particularly around the September position.
After such a rally in futures, buyers will now be focused on weather and yields. Favourable pre-harvest conditions will likely cause them to hold out as they wait for prices to come back down.
OILSEED RAPE
- Rapeseed prices maintain higher levels
This week, the market continues to consider the impacts of a lower European rapeseed crop while heading into the new season. There will be a lower crush number due to increases in rapeseed prices, reducing the competitiveness of rapeseed oil in comparison to other competing vegetable oils.
Supply of soybeans continues to drive the oilseed price market. The latest Brazilian crop update from CONAB showed an increase in production by one million tonnes to a total of 147.6 million tonnes which takes the country's production slightly closer to the USDA's estimates. Despite recent dry conditions in Brazil, the key factor going forward will be the higher production levels which may ultimately bring pressure to bear on the whole oilseed complex.
FERTILISER
- Urea/AN
With a later spring application period in the UK, domestic ammonium nitrate sales continue for immediate usage and prices remain competitive versus imported AN alternatives.
Prices had been issued for the June delivery period at a slight reduction to May's levels, which was aligned with European markets. However, these have now been withdrawn from the market and only May terms are available currently.
Natural gas and ammonia prices remain higher than desired at this time of year which is when the market is traditionally looking to reset for the new season price correction for summer deliveries.
With strengthening grain prices, forward urea enquiries for delivery from July onwards have increased over the last week. This is also due to many of farms looking to mitigate risk, monitor break-even ratio and offset fertiliser purchasing by marketing grain.
Egyptian values are reported to have increased between $10-$25 overnight at the time of writing, so suppliers are now taking stock of positions before issuing new levels.
- Liquid/UAN
A week of varying conditions has allowed many growers the opportunity to apply final dressings on cereals, meanwhile crop potential is being determined on both winter and spring crops.
Where additional product is required, you have access to a full portfolio of grades for prompt delivery.
As oilseed rape crops reach near total petal fall, the application window for foliar products aimed at increasing yield and extending canopy duration approaches. Nutrino Pro, an efficient form of foliar nitrogen, has consistent trials results showing an average yield increase of 0.4t/ha following applications of 20l/ha on oilseed rape at pod fill. Nutrino Pro is available for quick delivery in IBCs to meet this demand.
Values on both straight nitrogen and nitrogen sulphur UAN grades remain well priced for spot delivery in comparison to UK AN and NS compound solid alternatives.
- Straights/PKs
Phosphate and potash levels remain unchanged, as mentioned in the previous week's report. At the time of writing, the outlook in the short term is relatively flat with little if any changes on the horizon.
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