Last Friday, the United States Department of Agriculture (USDA) published its July World Agricultural Supply and Demands Estimates (WASDE) report, making notable increases for 2024 world wheat production which was increased by 5.4 million tonnes on the previous report.
This was particularly bearish data which triggered another wave of speculative fund selling and subsequently, the Chicago Board of Trade (CBOT) wheat futures lost a further 6% of their value - striking new contract lows.
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WHEAT
- USDA paints a bearish picture
Last Friday, the United States Department of Agriculture (USDA) published its July World Agricultural Supply and Demands Estimates (WASDE) report, making notable increases for 2024 world wheat production which was increased by 5.4 million tonnes on the previous report.
This was particularly bearish data which triggered another wave of speculative fund selling and subsequently, the Chicago Board of Trade (CBOT) wheat futures lost a further 6% of their value - striking new contract lows.
Higher US wheat supply is the main reason for the total increase, with the USDA seeing the US wheat harvested area rising to 38.8 million acres. Yields are seen rising by 2.4 bushels per acre on the USDA's previous estimate to a total of 51.8 bushels per acre. This leaves a crop of 54.6 million tonnes - up 3.6 million tonnes on previous estimate and is the largest US wheat crop since 2016.
The US weekly crop progress report supports the USDA's view and states US winter wheat harvest is 71% complete - well ahead of this time last year when it was 53%. The country's spring wheat crop condition is rated 77% 'good/excellent' which compares to the 51% rating last year.
Small increases for Argentina and Canada alongside a cut for the EU made up the other changes in world production, which is seen at a total of 796.19 million tonnes. Consumption was increased by 1.9 million tonnes on previous estimates to 799.96 million tonnes, leaving world stocks up five million tonnes to a total of 257.24 million tonnes. However, this will be almost five million tonnes down on the year.
- Heat threatens Ukraine output
News that the heat and dry conditions might see Ukraine corn yields drop by 30-35% has provided some market support but hasn't been sufficient to trigger any price rally yet.
However, without rain, the situation could worsen - the country's weather forecasters are saying late drilled crop yields could drop by a further 20-30% in central and southern regions.
Record breaking temperatures as high as 41 degrees during the first two weeks of July have been damaging. However, the Ukrainian Agrarian Council said it still expects grain and oilseed exports to match last year's figures of around 60 million tonnes.
Southern Russia may have experienced similar weather to Eastern Ukraine, but this didn't stop Russian wheat exporters queuing up to sell wheat to Egypt this week. Russia sold 770,000 tonnes for September delivery. Bulgaria is the only other competitive seller, securing the sale of one 50,000 tonne vessel.
- Slow start for EU and Russian wheat exports
Russia's reluctance to compete in earlier tenders to Egypt hasn't helped the country get off to a racing start this season.
July wheat shipments are expected to fall to just 2.8 million tonnes, down from four million tonnes the previous month. This might explain the aggressive offers and sales prices made in this week's tender to Egypt, while Russian shippers played catch up.
EU wheat exports are also off to a slow start but given the EU's failure to provide a timely, full set of data all last season, reading much into the first two weeks' of fresh data might present an overly negative picture.
EU wheat shipments to 14th July are put at just 788,000 tonnes - about half that of last season's pace.
Romania - the top EU wheat exporter - has shipped 286,000 tonnes so far. Comparatively, France has only shipped 73,000 tonnes. Nigeria, Morocco and Saudi Arabia are on top of the list of primary recipients so far, but Algeria and China do not feature.
BARLEY
- Feed grains markets in general lower but barley less affected
While maize and wheat futures have come under further pressure on the prospects of a good crop in the USA after years of drought affecting the country's harvests, our domestic barley prices have held relatively steady. From two to three weeks ago, barley's discount to wheat has shrunk from around £30/t to £25/t.
The UK exportable surplus of feed barley is around 400,000-500,000 tonnes for crop '24, so while export sales are slow eventually something must happen. Either domestic values in southern and eastern England fall towards the export prices, or export prices rise to the level of domestic ones. This will play out, but it could take six months.
- French spring barley better than winter crop
The French winter barley crop, which has a good percentage of malting types, has been disappointing. Yields are down 15-20%, screenings are higher than usual and bushel weights are lower than normal.
The French spring crop, of which a third is sown in November to early December, has proved to be below average in yield and quality. However, it's still useable with some cleaning. From the little amount they have cut so far, the spring-sown crop looks to be performing better. Overall, the nitrogen levels are low which makes the EU brewers and maltsters more confident that supplies will be forthcoming in decent volumes, so they have not entered the current market.
- Danish/Swedish crops on track for average results
The recent history from Denmark and Sweden has been poor crops one year followed by great crops the next.
Last year, the crops were initially drought affected then became plagued by too much rain which created secondary tillers then germination issues. So far this year, everything is on track for normality.
This area is significant for the size of its exportable surplus which helps balance the overall malting barley supply and demand picture. Carry over supplies from crop '23 are not that high in mainland Europe, so 'normality' in yield and quality is what brewers hope for this harvest. In around eight weeks' time, we will know a much more complete picture.
OILSEED RAPE
- Rapeseed values experience weekly losses
Rapeseed prices have been subject to compounding weekly losses due to selling pressure from freshly harvested Black Sea supply and continued weakness in vegetable oil markets, both of which have been pushing the market down.
Despite disappointing new crop yield reports in Europe, weak biodiesel processing margins and good crusher cover after the rally of early July have further contributed to weakness in the market. Going forward, harvest yields and the ability for crushers to cover their demand with domestic/Black Sea supply will be the focus.
In Canada and Australia, canola crops look decent, but this supply will only become available at the start of 2025. So far, there has been limited progress with the UK harvest, although early yields and oil levels look to be a shade lower than last year's averages.
Soybean values are currently very reactive to demand news from China, especially with the increased chance of a new Trump government which is perceived as reinvigorating a fractious trade relationship with China. Rapeseed values will inevitably react to these changes too.
PULSES
- As bean crop continues to mature crop prospects look better each week
A few UK sellers - both farmers and in the trade - are now taking the opportunity to take advantage of the relatively high prices that new crop beans are trading at, especially when compared to wheat. Over the past week, the premium to wheat has come down £5/t and we expect further declines in the coming weeks.
The Baltic crop continues to benefit from the good weather in that region, with the sunshine and showers ideal for finishing the crop off. We have also seen Baltic bean prices fall this week, so in the UK export values need to be lower by at least $10/t to get more in line with the competition.
FERTILISER
- Urea/AN
There's further news that the Indian tender has yielded only 450,000 tonnes of the 2.7 million tonnes offered last week for August shipment. This may have put a ceiling on the market, especially given more products will be available to other markets.
There are indications that Russian prilled material has supplied what's been offered thus far in the tender. Reports also suggest gas supply issues continue to hamper Egyptian and Algerian production – plants are running at 80% capacity, with some factories being shut down completely.
The firmer sterling has also given some relief on values into the UK domestic market. However, pricing remains strong on the back of the Egyptian plant shutdowns and short-term demand.
UK AN values continue to remain firm on EU gas pricing and ammonia pricing levels have firmed $25 over the past two weeks. Supply will remain tight for the time being due to the lower production levels and given CF Fertilisers is the only domestic supplier, we have a finite amount of product to fulfil a market that has a lot of tonnes still to fill.
CF Fertilisers is also the only supplier willing to offer tonnes in late autumn positions which would allow on farm storage issues to be resolved in the longer term – it also enables growers to commit to purchasing their fertiliser requirements now.
Sulphur has seen a rally in values over the past few weeks which would indicate that NS grades are remaining stable to firm for the foreseeable future.
- Liquid
Frontier liquid terms remain in place for autumn and spring tank fill and offer excellent value in the market against solid offerings.
As mentioned in last week's report, we have NP and NPK liquid grades available for oilseed rape establishment and urge growers to place orders at the soonest opportunity to allow timely deliveries.
- Straights/PKs
Phosphates continue to find global sales and over the past ten days have firmed $45 on cost, insurance, and freight (CIF) shipping offers into the UK.
Replacement values will increase to domestic growers over the next week as suppliers replenish stocks to cover oilseed rape and early autumn cropping establishment.
Potash markets remain stable with a floor being set for quarter three and four on better demand from the America's, whilst the European market remains quiet - perhaps a good time to buy.
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