Events unfolding because of the Russia/Ukraine conflict have once again had a major impact on world wheat prices this week. Following months of threats, Russia chose to halt its engagement with the UN-brokered Black Sea wheat export deal on Monday, which previously allowed vessels to safely collect wheat and other grains from selected Ukraine Black Sea ports. Since its inception a year ago, the deal has seen almost 33 million tonnes of grains and oilseeds shipped around the world, helping to supply some of the poorest nations.
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WHEAT
- Markets up sharply amid Black Sea supply concerns
Events unfolding because of the Russia/Ukraine conflict have once again had a major impact on world wheat prices this week. Following months of threats, Russia chose to halt its engagement with the UN-brokered Black Sea wheat export deal on Monday, which previously allowed vessels to safely collect wheat and other grains from selected Ukraine Black Sea ports. Since its inception a year ago, the deal has seen almost 33 million tonnes of grains and oilseeds shipped around the world, helping to supply some of the poorest nations. Russia failed to extend its part in the deal because the West would not agree to its terms regarding sanctions, which traders were expecting thereby only modestly moving grain markets higher at the start of the week. However, Russian drone attacks on Ukrainian port, Odessa, and an announcement by Russia that it would treat all ships using Ukraine Black Sea ports as military targets triggered a wave of short covering mid-week. Chicago Board of Trade (CBOT) wheat futures jumped 60 cents, which is the trading limit and represents 9% of the contract value, while London wheat futures rallied to their highest since 18th April. To add to the uncertainty Ukraine then announced retaliatory action, which again boosted market levels.
- Heat concerns for US corn
A period of extreme heat is set to impact the US corn belt in the coming days and could prove damaging for US corn crops. Last week, the United States Department of Agriculture (USDA) increased its estimate for the US harvested area by 2.32 million acres to a total of 86.3 million acres - up seven million acres on the year. It pegged yield at 177.5 bushels per acre which is above expectation and up 4.2 bushels per acre on last year and gave a total US crop of 389.15 million tonnes. However, this forecast heatwave suggests these expectations may prove to be over optimistic.
- Weather woes for major wheat producers
Weather in the Canadian Prairies has been likened to the prolonged heat seen in 2021 when Canadian wheat production fell to just 22 million tonnes. The USDA expect Canada, one of the world's leading high quality milling wheat exporters, to produce 35 million tonnes which is well ahead of the 30 million tonnes estimate made by local analysts. Dryness remains a concern in Argentina but it's the opposite case in China, where late excessive rains have led the government to cut 1% from its wheat production estimate to 134.53 million tonnes. The USDA's latest estimate for China remained unchanged at 140 million tonnes. China imported 820,000 tonnes of wheat in June, its largest volume for the month since 2020.
OILSEED RAPE
- Black sea developments dominate markets
The collapse of the Black Sea corridor agreement between Russia and Ukraine prompted sharp rises in rapeseed prices this week. Market participants fear they will not be able to ship new crop Black Sea oilseeds via vessels, some of which is already booked for imminent shipment and may need to be replaced with European seed which is currently at a significant premium. A lack of improvement for US and Canadian weather and therefore a lack of improvement in soybean and canola crop conditions is further adding to market strength.
In Europe, yields in the east are above expectations but further west, particularly in France, are a little disappointing. The overall EU production number, however, still looks historically strong.
Here in the UK, harvest progress is still minimal. However, early yields and oil levels look to be slightly lower than last year, with current weather conditions unlikely to offer any improvements. Farm selling increased dramatically this week as harvest ex-farm levels surpassed £400/t for many, representing an increase of £100/t in comparison to only two months ago. A weak sterling versus the euro has helped prop up these values, as inflation figures came in under expectations this week.
PULSES
- Beans
This week we have seen volatility in the market due to the Black Sea grain agreement ending, followed by Russia's threats to Ukrainian grain vessels. This has caused new crop bean prices to rise in line with other commodities. Domestically, demand for feed beans has increased. This is a trend that was seen last year and it's expected to continue, as compounders look to reduce their reliance on imported protein. Because of this, beans will remain at a premium to other competing protein sources. The weather has continued to be mild although is wetter compared to averages for this time of year. This could cause quality variances in different growing regions, but overall reports are still positive with crop production remaining optimistic.
- Peas
With limited new information for peas beyond what has been discussed in previous reports, the attention is on the weather. The wet conditions have potential to cause bleaching and colour quality is one of the biggest factors in this market. The weather, coupled with the lower crop area, could lead to price increases. Peas with a strong green colour will be trading at significant premiums in comparison to bleached samples.
FERTILISER
- AN/urea
Urea markets have continued to rise steadily this week as buyers cover off short positions worldwide, with a considerable quantity being bought for the European market. India is expected to issue another tender in the very near future. The exact timing is unknown, but could be as early as next week for early August shipment. However, much of this requirement is likely to come from factories in Russia, China and the Middle East. The market has seen increases of over $100 for Egyptian product since the middle of June, which has seen the UK market firm up over the last few weeks. It is reported that all Egyptian granular urea producers have been instructed by the government and gas suppliers to slow production down by approximately 30%. This will cut weekly production considerably and it is unclear whether it is a long or short-term plan. The action has been taken due to the recent hot weather, as the additional gas and electricity requirements for cooling have led to a reduction in gas availability. It was thought that granular urea may come back slightly into quarter four, but this now looks less likely due to these Egyptian production cuts and the potential Indian tender.
Nitrogen supply in Europe continues to be tight due to fluctuating gas prices and looking ahead to the winter months it may get even tighter. CF Industries, a global manufacturer of nitrogen products, withdrew its January/February offers in the UK this week. European manufacturers are struggling to competitively supply the UK with imported ammonium nitrate against UK domestic product prices and we are yet to see what the next moves are in terms of nitram pricing. Given recent events, it is worth considering that the conflict between Ukraine and Russia could escalate at any time and affect fertiliser markets.
- Liquid
Summer UAN tank-fill terms and tonnage availability have now been withdrawn, but autumn terms on UAN remain at this stage. Shippers and suppliers have noted the recent increases in urea and nitrates and are managing their positions tightly as we head into a potential six-to-eight-week harvest period in the UK. If you have been holding off buying following the period of calm and flat trading, you should at least now consider covering your tank-fill tonnage based on projected cropping plans.
Full UAN spring 2024 terms may be released in the coming days, which will give you sight of overall purchasing costs. Tonnage of spring volume will initially be limited as the market finds its level in a volatile environment. Please continue to discuss all options with your Frontier representative.
Omex announced earlier this week that it would cease production of its suspension fertiliser products at the end of this calendar year. These products will be replaced with a portfolio of clear solution complex compounds. Both NP and NPKS grades will be offered as part of the new Omex MultiFlo range. Our FACTS qualified advisors are available to discuss how these products could be part of an overall crop nutrition programme.
- PKs
The potash market saw a very small reduction in price last week, but it is believed that there could be very little further weakness, if any at all. The phosphate market could potentially see a little more weakness, but in terms of both phosphate and potash we are very near the bottom of the market on price. With harvest underway in many areas and as we get nearer the oilseed rape drilling/establishment period, it is advised that you look to cover your starter fertiliser requirements very soon to ensure this product is on farm in time for the usage period. If growing oilseed rape it's worth considering Oilseed Start as part of your fertiliser programme.
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