WHEAT

As expected, this week’s USDA report did little to shake off the bearish sentiment overhanging the wheat complex.

Reduced US exports and higher US and global stocks, which came despite a further upward revision in global usage, reiterated the abundant supplies of wheat, and at present, limited demand.

US prices tried to rally after the report was released, but selling pressure pulled the market lower to hit new contract lows.

The US Federal Reserve raised interest rates for the third time this year, although this has resulted in the US dollar falling in value against the other major currencies.

EU prices, unfazed by the price action in the US, have their own agenda to deal with. Matif December hit a new contract low as it expired, but with the May position trading just above its recent low (€162.25 on 28^th November), this is expected to be retested.

Egypt continues to pick-off what seems non-expensive wheat at its international tender. This week the country purchased the first non-Russian cargo since late August.

France’s agriculture ministry, in its last crop report of the year, pegged French soft wheat as being 95% in good or excellent condition.

However, the ministry did reduce the size of the 2017 soft wheat crop by 500,000t and reduced non-EU exports by 400,000t to 9.5mln t, citing competition as the reason for the reduction.

Given the current pace of exports, this reduced figure still looks highly optimistic. France was $20/t out on the recent Egyptian tender and, with reports of Argentinian vessels in the line-up and American sales made to Algeria, it can expect further competition throughout the remainder of the season.

In the UK the market continues to defy gravity as farm prices hold up against global weakness.

The defeat by the government on the key vote regarding the Brexit bill may cause a few wobbles. But, with sterling holding up well and uncertainty over domestic usage in the new year, current prices remain attractive to growers and may warrant some selling activity.

In summary, another week, another USDA report and further confirmation of no shortage of wheat. Availability continues to outstrip demand, which leaves the market likely to continue its downward spiral.

Fundamentally, wheat doesn’t have a story, and technically its only support is the sizeable short position held by the Chicago funds and when they decide to reserve their position.

OSR

Rapeseed prices continue to slide, with the Matif rapeseed futures market falling circa €8 in the last week.

France’s agriculture ministry increased its production number by nearly 500,000t and, with waning season demand and reports of additional purchases of Australian seed, the market continues to come under pressure.  

With consumers currently sidelined, the market keeps on adding to the already burdensome supply situation with bigger rapeseed (canola) crops in Canada, and now France.

In the short-term we really need to see a crop problem in South America to turn around this bearish market sentiment.

FERTILISER

Granular Urea

Despite a quieter week, global markets have continued to firm. Egyptian origin product saw another increase in prices as the latest sales concluded up a further $5/t, now $25/t above the lows of two weeks ago.

Producers now have little stock to sell for December and have already committed significant tonnes for January, keeping the outlook for prices firm into the new year.

In the UK, there has been an increase in urea buying due to the recent price dip.

Ammonium Nitrate

CF has pulled terms in light of the sharp increase in gas prices, which soared across Europe and the UK due to an explosion in a major gas hub in Austria. 

The pipeline is a key distribution hub of mainly Russian gas to various locations across Europe.

UK gas prices for immediate delivery rose by 35% to the highest levels in four years. CF, as a substantial user of natural gas, has therefore withdrawn terms to assess the situation before returning to the market.