The world's wheat futures markets rallied to new highs this week as prolonged dry weather conditions threatened wheat crops for some of the world's leading producers. Speculative funds were increasingly active buyers and took Chicago Board of Trade (CBOT) wheat prices to their highest level for five years. Wheat crops in Argentina and the US are suffering from a lack of rain, but it is dry soils extending across most of Russia that is raising the greatest concern. Russian farmers have planted over 70% of their winter wheat but ongoing dry conditions and warm temperatures could see newly planted seed fail to germinate...

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WHEAT

• Wheat prices at five-year highs

The world's wheat futures markets rallied to new highs this week as prolonged dry weather conditions threatened wheat crops for some of the world's leading producers. Speculative funds were increasingly active buyers and took Chicago Board of Trade (CBOT) wheat prices to their highest level for five years.

Wheat crops in Argentina and the US are suffering from a lack of rain, but it is dry soils extending across most of Russia that is raising the greatest concern. Russian farmers have planted over 70% of their winter wheat but ongoing dry conditions and warm temperatures could see newly planted seed fail to germinate. With no change likely in the medium term weather forecast, it is entirely possible that the world's leading wheat exporter could see a significant fall in its 2021 wheat output.

This week, analysts increased Russian 2020 wheat crop estimates to 83 million tonnes - the second highest ever - but exporters have been busy with September wheat shipments, hitting record levels above five million tonnes. This fast export pace coupled with the weather concerns drove Black Sea futures prices to record highs this week. Russia has previously said that it could introduce export curbs for the second half of the season to ensure domestic supplies are maintained. The 2021 crop concerns make this increasingly likely.

Meanwhile, neighbouring Ukraine has enjoyed some beneficial rainfall as drilling there reaches almost 50% completion.

• Defra publishes first UK wheat estimate

This week, the Department for Environment, Food and Rural Affairs (Defra) published its first UK 2020 wheat production estimate. With small increases for the cropped area and an average winter wheat yield of 7.7t/ha, a total crop of 10.13 million tonnes is thought to have been harvested. How accurate this will prove to be remains to be seen, but this would be at the top end of many private estimates.

Following world markets, UK wheat futures rose to new contract highs and physical prices are reflecting the costs of imported supplies. Consumers continue to purchase EU supplies in an attempt to have sufficient cover ahead of possible import tariffs that may be implemented should the UK not strike a trade deal with the EU.

• Markets braced for USDA revisions

This afternoon at 5pm, the United States Department of Agriculture (USDA) will publish its latest monthly revision to the World Agricultural Supply and Demand Estimates report. Trade estimates anticipate cuts in US corn yields and US wheat production to be outlined in the report. Elsewhere in the world, some production increases are expected. The USDA has previously made estimates of 78 million tonnes for Russian wheat production, which compared to higher estimates from private analysts of over 83 million tonnes. Similarly, estimates from the USDA for Australian wheat production were much lower than those from private analysts at only 28.5 million tonnes in comparison to estimates of 30 million tonnes from other sources.

In contrast, the USDA's wheat estimates for Argentina exceeded predictions from other sources, standing at 19.5 million tonnes in comparison to recent estimates from private analysts which have been as low as 17.5 million tonnes.

The recent quarterly stocks report from the USDA highlighted the second biggest draw down of US grain stocks on record for the first quarter; this was helped by strong buying from China. Traders expect the USDA report this afternoon to reflect this, with cuts for both US and world wheat and corn ending stocks. The USDA will not provide data for 2021-22 until next May.

BARLEY

• Good two-way barley trade this week

It has been an active week in the feed barley market with renewed export interest into EU destinations. Rising corn and wheat markets due to weather uncertainties has turned EU compounders back to barley which, in relative terms, represents a cheaper raw material. This is not so much the case in the UK where feed barley has been depleted as a raw material for some months already. Farmers have continued to sell into these export homes this week but perhaps in a slower fashion than previously. Export pace is relatively brisk, as it needs to be, and the UK is currently competitive to many origins.

• AHDB raises crop size

With a figure now nudging nearly 8.3 million tonnes, the Agriculture and Horticulture Development Board (AHDB) is predicting a crop which will be the biggest for approximately 30 years. Trade estimates are nearer eight million tonnes, but there is no doubt that this is the bottom figure.

Scotland has recorded record yields, partially due to the move into higher yielding varieties such as Laureate but also due to the fact that the country has avoided the extreme weather that affected growers south of the Humber.

​OILSEED RAPE

• Domestic markets quiet

We've seen little change in physical prices this week with traded volumes remaining low. Compared to other crops, there is a much higher proportion of domestic rape production that is moved and priced at harvest, leaving farmers less interested in the market at this time of year. Meanwhile, crushers are concentrating on getting through their considerable import commitments. The lack of follow through buying since last week's bullish USDA stocks report has been a surprise, but there is no doubt that recently increased lockdown measures being introduced in a number of countries has tempered buyers' enthusiasm for putting on more cover.

• USDA report out later this week

In the longer term, the outlook remains bullish for global oilseeds. US agricultural exports to China in August hit $2.15 billion, largely led by soybeans, which is a record for that month. The monthly USDA World Agricultural Supply and Demand Estimates report is due out later today and the key watch point for markets will be any downward revision in the projected US soybean yield.

• Concerns over South American plantings

Buyers are anticipating good supplies of oilseeds, and soybeans in particular, from the Southern Hemisphere in a few months' time. There is a bit of a story developing here, with dry weather delaying plantings in Brazil and a strengthening El Niño weather pattern causing concern over Argentinean plantings, which are due to start in ten days' time. If there is a downward revision of production figures from this region, then the US will be expected to add additional export volumes to its January and February plans, inevitably leading to even lower end of season stock numbers.

 PULSES

• Little movement in pulse markets

This week, the demand for human consumption beans has come to a near-standstill with the best quality samples in the north of the country making a mere £8-12/t premium over feed beans.

Feed bean values remain firm. However, there is still limited demand further forward, leaving the potential for some downward movement in price during the next four to six weeks.

Following the trend of previous weeks, pea markets are also holding firm with small volumes being offered and bid for across the quality spectrum. We encourage growers to submit samples now in order to make the most of current marketing opportunities.

 FERTILISER

• Nitrogen/urea

It has been another slow week as drills are waiting for some decent weather to progress plantings. Some areas of the UK have been lucky to avoid the rain and are well on the way with autumn drilling.

The urea markets remain quiet with a slight firming of numbers from Egypt and Algeria. India is still to tender for the next volume of granular urea required pre-Christmas. Speculators are expecting increased volumes from the tender, which would be in line with the latest figures coming from Brazil. Brazil has imported two million tonnes in the third quarter compared to one million tonnes in the same period last year.

UK nitrogen suppliers are expected to release new terms in the next few days. The other main issue that is heading our way will be Brexit and any subsequent import duties levied. Although it is currently too early to predict how import duties may change as we draw closer to the Brexit deadline, the situation continues to warrant close attention.

• PKs

The market is seeing a growing demand for phosphate and potash as some areas get close to drilling completion. With phosphates at ten-year lows, the market is more likely to see increases on prices rather than any further reductions.

Potash values are more dependent on euro and dollar exchange rates against sterling. However, with US elections, Brexit and Covid each factoring, the outcome is tough to predict.

Planning all nutritional requirements pre-Christmas is advised, as supply may well be affected by Brexit and the continued impact of Covid-19.

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