WHEAT

The USDA report released yesterday did little to shake the markets from their current bearish trend.

Although US wheat stocks were lowered, the reductions were in the hard wheat classes, mainly reflecting the recent Iraqi trade.

Chicago wheat, which competes with European supplies, continues to struggle to attract additional domestic or international demand, not helped by the surprising rise in USDA’s US corn yield estimate to a record 175.4 bushels/acre. This equates to around 7.5mln t of additional production and should limit any additional feed or food demand for US soft red winter wheat.

EU prices are mostly stable on the week, with a level of support coming from a weaker euro/US dollar rate.

Brussels reported EU soft wheat exports as of 7 Nov at just over 7mln t, down 25% on the year. At this rate, the yearly all-wheat export figure will be around 25mln t, making USDA’s current 28.5mln t forecast increasingly unrealistic. 

Egypt again purchased only Russian wheat (120,000t) at its recent tender. No French or Ukrainian supplies were offered and Romanian wheat is unlikely to feature much more, given that the Russian business traded at $8-10 below Romanian replacement values.    

The UK market, showing great resistance given the global situation, is actually trading marginally higher on the week, supported by a lower currency and a continued ‘more-buyers-than-sellers’ scenario.

Market dynamics continue to trade a fairly balanced supply/demand position, with limited demand in the deferred positions as end-users look for global conditions to pull values lower.

In summary, the USDA continues to project abundant supplies of coarse grains, which gives US fund managers, the major market short, little incentive to excessively trim their short positions.

Northern hemisphere weather is currently posing no threat to winter sowings, which leaves the markets mainly open to bouts of short-covering, as and when the funds decide to move. Until then expect the sideward price action to continue, with further re-testing of both US wheat and corn contract lows.

OSR

Market expectations of a generally bullish outlook for soy in last night’s USDA report were not met. Rather than being cut, the forecast US yield remained unchanged, while global ending stocks increased by nearly 2mln t. CBOT soybeans closed at their lowest point for 10 days.

With last night’s disappointment, and a firming euro, the Matif looks likely to see a setback, at least in the short-term, after a rally in recent days. This was aided by the uptick in mineral oil, driving a round of bio-diesel pricing.

In the UK, currency continues to add an additional level of complexity, and we have seen some significant volatility in sterling/euro since last week’s interest rate rise.

UK farm gate prices have seen a good increase in the last week, partially aided by the FX. But these higher values are bringing fresh sellers to the market, and given the large volumes of rapeseed that are in Europe, it may well be sensible to add to sales at these higher numbers.

FERTILISER

Granular urea

Last week’s Indian tender, which initially saw offers at $10/t above the previous one, was later scrapped, leaving suppliers with surplus November stocks.

This may now force producers to accept lower prices as all sites are up and running and they will want to avoid further stock increases.

Despite this, the factors that were driving the market higher remain. India will need to tender again for the 800,000t it had been expected to purchase last week, although it might hold off for a further 2-3 weeks.

Chinese production remains low due to high coal prices, so exports are significantly lower year on year.  The US, European and Turkish markets all remain short of urea for the spring and need to buy substantial quantities come January/February.

Ammonium nitrate

CF released new terms this week indicating a £10/t increase to both straight nitrogen and nitrogen sulphurs.  Levels still represent excellent value compared to European markets, where 33.5% is offered at an equivalent to £260/t.

The £10/t increase will allow for stocks of imported AN purchased earlier in the year to feature again. However, with such firm markets, replacement vessels remain expensive in comparison to UK levels.

NPK

Phosphate markets firmed significantly over the week and importers have reacted pushing prices of TSP and DAP up by £10/t.  Whilst demand has remained steady for PK and NPKs, the spiraling raw material costs has pushed both blends and CFs compounds up.