Having seen a spell of speculative fund short covering propel wheat futures prices to multi-week highs earlier this month, markets have subsequently eased lower again.
Questions remain over Russian wheat exports and the country's 2025 wheat production potential. However, in the near positions there is a more than adequate supply and with good cover, buyers are back on the side lines. Russian weekly wheat shipments remain at about one million tonnes per week, but this week the country missed out in one international tender.
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WHEAT
- Markets in drift mode
Having seen a spell of speculative fund short covering propel wheat futures prices to multi-week highs earlier this month, markets have subsequently eased lower again.
Questions remain over Russian wheat exports and the country's 2025 wheat production potential. However, in the near positions there is a more than adequate supply and with good cover, buyers are back on the side lines. Russian weekly wheat shipments remain at about one million tonnes per week, but this week the country missed out in one international tender.
Russian exporters respected the recommended floor price of $240/t FOB for offers to Tunisia but lost out to other origins as Tunisia bought at $263/t including freight. It's believed Bulgaria and Ukraine will be the likely suppliers and Ukraine extended its wheat shipments for the season so far to 7.2 million tonnes, about half the estimated exportable surplus.
- Russia weather watch
Dry weather conditions during the drilling period and poor establishment have led one analyst to reduce their Russian 2025 wheat production estimate to a shade above 80 million tonnes. This would be the lowest Russian crop since 2021 and potentially signals a change in the world trade dynamic.
If Russia continues to export unchecked and the United State Department of Agriculture's (USDA) estimate of 48 million tonnes is achieved, that will leave Russian wheat end stocks down by over four million tonnes on the year to 7.24 million tonnes. Russia's annual domestic wheat consumption is just below 40 million tonnes which would leave a maximum 40 million tonnes available to ship in the 2025-26 season. Dryness is forecast to persist through the rest of this month into November.
Ukraine looks more upbeat with winter wheat drilling 85.9% complete, although East Ukraine is still seeing a little rain.
- EU still struggling
EU weekly wheat exports were up by 379,000 tonnes on the week up to 7.02 million tonnes which is now over three million tonnes behind last year.
Analysts, Stratégie Grains, see the EU shipping ten million tonnes less than last year at 24.9 million tonnes. If Ukraine and Russia exhaust their surplus supplies, there may be more opportunities for export sales from the EU in the second half of the season.
The UK is a solid number four in the list of sales destinations, taking 514,000 tonnes so far. Nigeria is still the top taker with 1.114 million tonnes. Having exported just 600,000 tonnes of wheat so far, Egypt's General Authority for Supply Commodities (GASC) said it hoped to increase French wheat imports giving a boost to the potential of future shipments. North African neighbour, Algeria, excluded France from countries able to offer wheat in its last tender last week.
Adverse wet weather continues to hamper French corn harvesting which was put at just 13% complete - up just seven points on the week and lags notably compared to the 67% last year and 55% average. France has seen its wettest September in 25 years which has hampered winter wheat drilling also, showing 10% planted compared with 27% this time last year.
BARLEY
- Feed barley weaker despite big discount
Given the weakness in other cereal markets, feed barley prices have drifted lower again on the week. Despite being around a £30/t discount to feed wheat and a £40-£45/t discount to maize, fresh demand has been limited to February–July because compounders are well covered until the end of January. Farm selling has started to slow given the drop in prices and opportunities for fieldwork.
The UK supply and demand picture suggests we'll need to export feed barley at some point in the season, which the UK is not competitive on today. However, this pressure may diminish if feed barley can find extra demand domestically.
OATS
- Production bounces back for harvest '24
In the last couple of weeks, we've seen the first publications of oat production for harvest '24 from the Scottish Government and the Department for Environment Food & Rural Affairs (DEFRA).
Scottish oats performed well this harvest, with yields up 14% from last year. This, combined with a larger area, has meant that production is up 21% year on year. Quality has been good as well, especially regarding bushel weights and screenings.
DEFRA also published its production estimates for England which increased production year on year by 20%. The market had anticipated this larger crop because of the issues last autumn and the resulting increase in spring oat area. Spring oats were planted late, however, the growing season was close to ideal and as a result many yields reported were between 6t/hectare and 8t/hectare which we believe will significantly surpass Defra's 20% increase estimate.
These positive yields have allowed farmers to continue selling oats and generated a good margin as prices rebounded from harvest pressure. Quality has also been excellent in England, with the market producing very little feed oats.
The exportable surplus of oats could be upwards of 190,000 tonnes but so far minimal quantities have been exported. Some vessels have been sold recently but only amounting to 20% of the potential exportable surplus for the new year.
With the EU crop rebounding from five million tonnes last year to its 'more normal' seven million tonnes, there is no shortage of EU or UK oats this year.
OILSEED RAPE
- Rapeseed prices have been on a strong run
Recently, oilseed rape markets have been mainly driven by vegetable oil price increases due to rises in crude oil values and relative supply tightness. Currently, focus has been on the sharp decline in sunflower production in Ukraine and other eastern European producing countries.
Fresh offers of Black Sea rapeseed have now dried up and EU crushers are left with trying to find domestic seed until Canadian and Australian seed starts to enter Europe. The supply and demand estimates say there is enough rapeseed to meet demand, but this is reliant on farmer's continued selling into this price rally, with prices now over £400 ex farm.
After recent rains, soil moisture in Brazil has been increasing slightly which is aiding soybean planting in some regions. However, some key areas remain drier than necessary and have until mid-December to get the anticipated record area planted.
PULSES
- Beans
There's strong domestic support in the forward months for feed beans as buyers look to formulate the summer ration. However, export feed demand remains subdued with Baltic beans being offered at a discount to the UK.
The poor-quality crop from the Baltics means buyers are eager to buy UK beans for human consumption which is helping to support the market and we can anticipate more demand going forward.
- Peas
Green peas remain at around £370 ex farm due to ample supply as we're seeing low levels of bleaching in samples. Demand for green peas is well balanced and therefore we don't expect to see any volatility in this specific market.
FERTILISER
- Urea/AN
This week, the European fertiliser industry came together for the annual Argus Fertiliser Europe Conference. Taking place from Tuesday and finishing today, the agenda for day one focused on sustainability and decarbonisation in the industry and consisted of the following topics:
- Sustainable fertilisers and how to price them
- Biostimulants and the role they play in the market
- Impact of the Carbon Border Adjustment Mechanism (CBAM)
- Decarbonising nitrogen production through air and water usage
Day two of the conference was centred around the current market dynamics and the energy transition in Europe. Today on the final morning, attendees are discussing the outlook of the gas market, volatility in the shipping markets and the geopolitical impacts on the trade.
Producers and traders who attended the conference have varying points of view on how the market is likely to play out in the coming months. As a gas intensive industry, as always, the watch is the energy prices (especially gas) in Europe and the ammonia trade. This week, another major European producer announced that one of its plants will stop ammonia production and switch to using imported ammonia - yet another plant which will produce less finished product for the market.
Back to the UK market and autumn sowing progress – we have a mixed bag but things generally look a little better than this time last year. Whilst sowing progresses, market demand is low.
The conflicts in the Middle East and Ukraine/Russia are of interest because both influence energy prices, but available production downstream is falling all the time. Volumes will be tight in Europe and in the UK throughout spring if demand doesn't pick up soon. The trade hopes for a dry couple of weeks to get the rest of autumn sowing complete.
- UAN/liquid
Last week, suppliers released revised values on UAN which have been well received by growers who have tank capacity this autumn or an additional nitrogen/nitrogen sulphur requirement for the coming season.
As the drilled area continues to increase, many are able to commit to additional volume and find UAN competitive in comparison to solid nitrogen/nitrogen sulphur products.
Late last week, an East Anglian site received fresh UAN stocks with product now being discharged into portside storage and is available for delivery onto farm through this autumn/winter period. For those with a requirement for NP or NPK products on cereal, root or forage crops, values are now available for tank fill and spring 2025 delivery.
- PKs/straights
We're starting to see demand in areas where drilling is nearing completion, especially for base fertiliser for root crops. Prices for all raw materials such as potash, phosphates and magnesium remain flat.
Suppliers' stocks levels are not great but ample to supply current demand. As always, but especially given 2024 rainfall, soil sampling is an absolute must prior to buying any base fertiliser.
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