WHEAT

After posting a small and short-lived recovery, US markets have continued their downward spiral this week, trading back towards the recently set contract lows.

This was despite this week’s forecast 42% drop in Australian wheat production compared with last year. Australian agricultural bureau ABARES predicts the country will harvest just 20.3mln t, but this had largely already been factored into the market.

The figure is still 1.2mln t above the current USDA projection and remains above local estimates, despite adverse weather conditions.

Pressure was re-exerted onto the market when Stats Canada reported Canadian all-wheat production at near 30mln t, 2mln t higher than trade expectations, and 3mln t higher than the current USDA projection.

US exports still drag last year by 7%, and shipments for Jan-May would have to exceed those made in Jun-Nov by 13% to achieve the export projection. Not an easy prospect, given a larger-than-expected Australian wheat crop and a much larger Canadian wheat crop.

EU prices, like their American counterparts, have fallen on the weaker global tone and from the upward revision in crop size by European agri-trade association Coceral.

However, prices have shown little sign of slippage due to the ongoing lack of farmer selling. EU shipments remain 22% behind last season, still pressured by aggressive sale campaigns by the Black Sea exporters, notably Russia.

Ongoing uncertainty over the Brexit divorce bill has been the main interest this week. However, the grain trade has shown little change in sentiment. Merchants shorts that had been supporting the market seem now to have sorted out their December requirements and, with the global weakness, seem more relaxed in bidding for deferred positions.

In summary, with demand from the major global importers limited until the final quarter (April-June), the main question now for the trade is where can the market find enough demand to push values higher.

Market analysis in the new year will increasingly begin to focus on new crop, where there are some supportive factors. However, until then it continues to be a market where supply outstrips demand.

OSR

StatsCan surprised the market last night with its latest crop estimates, which pegged Canadian production at a record 21.3mln t.

After the extensive drought conditions that were seen across large parts of Southern Canada in the summer, many were expecting the crop to struggle to reach last season’s 19.6mln t.

However, farmers reported better-than-expected outputs for both grains and oilseeds and the market fell sharply.

Despite the ongoing weather concerns in South America, the bearish StatsCan report pushed soybeans down to their recent lows, and Matif rapeseed followed suit with prices down €5/t.

To add to the bearish sentiment, we hear several cargos of Australian rapeseed have recently been traded for delivery into Europe in the early new year at values that undercut current Continental prices.

FERTILISER

Granular Urea

Prices eased far enough this week to attract numerous traders to step back into the market. Levels firmed from $220/t to $240/t fob for January shipment in the latest sales out of Egypt.

With traders selling short into Europe and Turkey over the past couple of weeks, there has been a rush of demand to cover these positions now that prices are on the rise again.

Expectation is that India still needs to tender before the year is out and this would definitely lend further support to the market.

In the UK levels did stabilise, but are already starting to edge higher, tracking international pricing.

Gleadell is in a good position to offer urea at attractive levels, with a large vessel of Egyptian origin urea set to arrive in early January.

Ammonium Nitrate

CF have held prices unchanged, offering a discount to anyone who can take product in the first half of January.

The current levels remain competitive compared to European values, which are trading at much higher levels. However long-holders of imported product are now starting to move stock at a discount to UK blue bag.