WHEAT MARKETS

US markets have climbed about $2/t in mainly range-bound trading in the two weeks since our last report.

Concerns in the US are mounting over demand, both internally and on the export front, as importers continue to by-pass the US, opting for cheaper alternatives.

Although Russian export prices have edged higher, due to ongoing export demand and a firmer currency, more competitively priced US supplies continue to struggle to find interest.

Exports inspections fell to just 170,000t in the week ending 19^th October, and are currently running 5% lower year on year.

EU prices remain unchanged from our last report, with markets being affected by a general lack of demand. EU soft wheat exports are running over 30% lower year on year, and project little sign of a significant change in the short to medium term.

Russian wheat continues to monopolise Egypt, with the recent trade meaning that for four consecutive tenders, no other origin has been purchased.

France might be the source of the majority of the recent Algerian soft wheat tender, although working on normal freight costs and rates, the price may have been heavily discounted to secure the business.

UK prices are also unchanged, with sterling slightly weaker. As we move into November, the potential increase of available cash wheat may erode the elevated delivery premiums built into the market due to the supply squeeze during October.

As growers finish field work, they may focus on marketing, taking advantage of the relative firm spot prices.

In summary, apart from a bout of fund short-covering, markets have moved sideward over the past two weeks. Market fundamentals remain bearish, with no weather problems threatening new crop northern hemisphere sowings so far.

Demand remains lacklustre, and supplies remain burdensome, leaving either a major weather issue, or a complete reversal to the current fund short position, as the key supportive factors.

OSR MARKETS

The soybean harvest in the USA has progressed rapidly. USDA reported that combines covered enough acres last week to bring harvest into line with five-year averages.

Weather conditions have been more favorable for plantings in Brazil, whilst worries in Argentina remain offset by record carry-in stocks. Certainly, Argentine growing conditions seem to be priced in, and the CBOT soybean contract has felt pressure over the past two weeks.

The Canadian canola harvest, as in the US, is ahead of last year and the five -year averages. The major canola producing state of Saskatchewan had only 5% left to cut last week, so is no doubt now finished.

The timely harvest (of a bumper crop) has increased farmer selling, with monthly canola exports greater than expected and crushing usage at seasonal highs.

The UK scenario remains at status quo. Farmers are reluctant sellers and prices remain stagnant as crushers use imported seed and merchants cover previous sales.

If imported vessels are tendered on the looming November MATIF delivery, this will push the European market lower and, no doubt, UK buyers will want to follow. Unless weather conditions drastically change in South America or sterling devalues, UK farmgate prices look ready to move lower.

FERTILISER MARKETS

Ammonium nitrate

Global nitrogen markets have continued to increase over the past few months and the outlook remains firm for nitrates across Europe.

CF released new terms and has surprised many observers by the competitiveness of its AN pricing compared with other markets, which leaves European imports continuing to struggle.

Granular urea

Urea markets remain firm and Egyptian FOB values have continued to edge higher this week.

Indian has arrived with another tender, hoping to secure more tonnes, and traders expect fresh demand to surface from Europe, Turkey and Brazil.

The outlook is that this buying/demand will keep the market firm through November and December into Q1.

However, a possible correction lurks in the background and questions remain at what stage might this happen, to what level and if it happens will it arrive too late?

NPK

Interest is building in spring grades as growers complete drilling.

CF has revised values of NPK compounds for November and December delivery in an attempt to encourage early buying. Despite rising phosphate and potash costs, blenders have had to reduce blends prices to compete.