Wheat markets continue to experience notable price volatility in response to developments in the conflict in Ukraine. US wheat futures fell sharply on Tuesday to their lower trading limit and to their lowest level since 1st March. This is in response to encouraging comments made in peace talks being held in Istanbul.
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WHEAT
- Market volatility continues
Wheat markets continue to experience notable price volatility in response to developments in the conflict in Ukraine. US wheat futures fell sharply on Tuesday to their lower trading limit and to their lowest level since 1st March. This is in response to encouraging comments made in peace talks being held in Istanbul. Traders saw this as a positive step toward a peaceful solution and subsequent heavy selling took markets lower. The market has since regained most of its losses with Thursday's United States Department of Agriculture (USDA) reports bolstering prices further, as traders refocused on US grain stocks and plantings. It will take time for Ukraine to repair its destroyed export facilities and other infrastructure, but spring drilling is well underway. Ukraine's deputy agriculture minister, Taras Vysotskiy, stated on Thursday that 400,000 hectares have now been drilled, which is a tenth more than at this stage last year.
- USDA stocks and prospective plantings reports
On Thursday, the USDA published its stocks and prospective planting reports. Tight global grain and oilseeds stocks had created lucrative opportunities for US arable farmers, therefore the market had expected increased planted areas. However, the report pegged acreage well below trade estimates and the market subsequently moved sharply higher. Wheat acreage was noted at 47.4 million acres. This compares to the average trade estimate of 47.8 million acres. This all-wheat figure, if realised, would be the fifth-smallest crop since records began in 1919. In addition, wheat stocks came in well below the average trade estimates and are at their lowest in 14 years - this is just one contributing factor to the current record grain prices globally. Corn acreage was 89.5 million acres, in comparison to trade estimates of 92 million acres. This turns focus back onto the importance of Ukrainian spring plantings, crop development in South America and US weather for the next 4-8 weeks; the latter of which could be pivotal.
BARLEY
- Demand for old crop feed barley continues
UK old crop feed barley continues to be in demand and is now valued at parity or a slight premium to feed wheat in much of England. This means barley prices are at season highs in the UK. Unsold stocks on farm seem to be almost exhausted, with just a modest amount coming to the market each day as growers reach to the back of the shed. With the high price of feed stocks, livestock farmers will be looking to turn out animals as soon as it's possible when the latest cold snap has passed and grass growth starts again in earnest.
- Feed and malting barley sellers remain absent
New crop barley trade remains quiet, as sellers of both feed and malting barley remain largely absent from the marketplace. Lack of liquidity in the malting market means premiums over feed remain good for now. Some buying interest for feed barley does exist, as compounders look to cover new feed sales. With wheat futures around £10/t off contract highs, some end users still see a buying opportunity due to the uncertainty still in the world market regarding access to supplies in both Ukraine and Russia this summer. New crop feed barley continues to trade around £15/t below feed wheat across the UK.
- Spring barley drilling nearly complete
Drilling of the spring barley crop in England is now more or less complete. In Scotland, there is still a significant area to put in the ground, particularly in the north, but this pace represents a normal drilling window for these areas. The rain seen in areas of the midlands and northeast England this week is just what has been needed to get the spring barley crop up and running. With warmer but wetter weather forecast for next week across much of England, prospects for the spring barley crop look fair at this stage. Across much of northern Europe, relatively dry conditions persist, although some rainfall has been seen across France and Germany in the last couple of days.
OILSEED RAPE
- Complexity in oilseeds markets develops further
This week saw further developments in the complexity of the worldwide oilseeds picture. On Thursday afternoon, the USDA released its stocks and plantings report, which pegged US soybean plantings at just under 91 million acres. This figure was around 2.2 million acres above the average trade guess preceding the report. This transferred through to MATIF rapeseed, which had been previously resilient to changes in the soybean market in the month prior to the report with the market closing €22/t lower on Thursday. China is a point of focus in oilseeds and wider markets at the moment, as the country pursues harsher measures following a sharp spike in Covid-19 cases. On the whole, this is reducing demand for oilseeds products and causing logistical issues for products such as fertiliser, which could be putting some crops at risk. These factors have contributed to an approximate £20/t drop in UK ex farm values for rapeseed since the start of the week. Despite this, supply and demand for old crop rapeseed and rapeseed oil looks very tight with supplies of competing sunflower oil still stuck in Ukraine. There is little hope of getting these supplies out before new crop sunflower or rapeseed supplies enter the market. Weather is also becoming a driving factor. Europe is now seeing widespread sub-zero temperatures, which is adding to the less-than-ideal conditions this season. It will be in the trade interest to see how this affects rapeseed crops going forward.
FERTILISER
- Nitrogen
There has been little notable activity in fertiliser markets this week. All focus is currently on ammonia, which is now trading up to $1650/t; a considerable increase from $900/t in autumn 2021. Gas prices continue to be very volatile, with UK gas prices up to £2.99/therm at time of writing.
Granular urea values offered out of Egypt are $1200/t, with India due back in the market next week to secure more product. These high numbers, coupled with huge freight rates and concerns around future demand at these levels, has slowed interest, especially in the UK.
The UK nitrates market remains slow with little demand until better weather for spreading returns. The current weather forecast will not help demand for the next few days, especially with snow falling in some parts of the UK. Product availability of imported or UK-produced AN remains very tight.
- Liquid
UAN terms are still offered as strictly POA, but suppliers do have availability that enables them to offer limited products for the remainder of the current season.
Bulk foliar urea terms are now available for application to oilseed rape and milling wheat. Full load pump off offers reflect the current strong urea markets, but do give growers some options in this sector and should be seriously considered as part of a nitrogen programme this season.
Limus ® Clear, the BASF urease inhibitor for UAN is available nationally for growers to further increase the efficiency of their liquid-based system for spring applications. Please speak to your Frontier contact for more information.
- Phosphates and potash
The biggest move this week has been on potash. Suppliers and importers are finding demand from South America while supply chains are offering reduced volumes. This has forced offers close to £700/t in the UK. Demand drastically fell away when prices went over £600/t, which leaves the trade awaiting to see the next moves in the UK.
Replacement phosphates for UK blenders have generally been sourced from Russian suppliers. Therefore, it's unclear what the effect will be on TSP/DAP offers – time will tell. Very few blenders will offer DAP due to low stocks; DAP last traded in the UK at over £1100/t.
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