WHEAT

As one report commented this morning, referring to the 21 cent/bushel (£5.50/t) rise in the US market yesterday, did someone just wake up a sleeping giant?

For some time now, concerns have been accumulating over the dryness in the main US hard red winter (HRW) areas, and its potential impact upon yield and final 2018 production.

Although the official weekly crop ratings report, released by the USDA, will not commence until next month, monthly reports for key states have shown a marked deterioration in the crop to well below last year’s ratings.

With a cold snap expected to enter the southern plains, with little or no snow cover to protect, this has triggered a surge of short-covering on the potential of lower 2018 output.

EU prices, buoyed by the movement in Chicago, have also firmed this week, up €4/t. Cash premiums have eased, leaving French wheat still above Russian (on a comparable spec), but German/Baltic supplies are getting much closer.

The rise in Russian prices is mainly due to a continued demand for export wheat, as logistics tighten on weather and farm prices remain firm on the strength of the rouble.

The EU commission revised lower its outlook for 2017-18 common wheat exports to 24mln t, which still looks too high against the current pace. In its initial forecast for 2018-19, the commission estimated EU common wheat production at 140mln t, down from 141.6mln t in 2017-18.

LIFFE also gained some support from rising global values, but is still mainly driven by movement in sterling, which over the week has weakened on less than positive vibes over Brexit.

The move higher, by just over £3/t, has left physical cash sellers demanding more for their wheat, although end-users and market shorts seem reluctant to chase the market higher.

Overall, the onslaught of winter weather seems to have stirred up the market, especially in the US, where the rationale for the increase has been well known for several weeks.

USDA threw a few crumbs of comfort onto the table last week, projecting US wheat acreage for 2018 higher than expected. However, while this may provide a scale of security over 2018 production, at present, final harvested acreage and yield are deemed more important than planted acres, especially with talk of greater crop abandonment.

The fund managers will determine how long this bull-run lasts, as in this week’s position report they were showed still holding a sizable market short. One word of warning, a similar spike in prices to the current one has not been witnessed since the market moved to its high in July 2017, where the sheer weight of global supplies then pulled the market back to its December low.

The world still is holding record wheat inventories at the end of this marketing year, so crop issues must result in major crop losses for a market to retain its strength – remember, bulls need constant feeding!

OSR

Rapeseed prices continue to influenced by the upward momentum coming from CBOT soybeans as weather concerns in Argentina continue to undermine the size of that country’s crop.

However the burdensome stock situation in Europe is preventing Matif rapeseed futures from following on a one-to-one basis as record import volumes and falling demand are undermining the market.

Currency continues to be a key influencer for UK farmgate prices and the slip in sterling this week has pushed prices back to circa £300/t ex farm in some areas of the country.

Fundamentally there is more than enough rapeseed available and there is  nothing wrong with the developing crops at this stage. The on-going global and European weather situtions need to be watched, but we believe that this uptick represents a good opportunity for growers to add to their sales. 

FERTILISER

Granular Urea

Buyers have returned to the market after a new Indian tender was announced at the end of last week.

With the already diminished supply for March/April shipment, traders have now entered the market to take long positions, and prices have firmed.

As Europe is hit by snow storms, appetite for buying remains low and markets are yet to react to the firmer FOB levels.

In the UK, with any chance of applications of nitrogen looking a while off yet, demand is steady.

No new shipments of urea are likely to arrive now as we enter March, so close to the first application window, stocks of urea are tight. We would advise growers to book requirements.

NPK/PK

Potash prices are starting to creep up as old stocks diminish, and suppliers are now moving onto new material bought at a higher level.

Phosphate markets have started to firm by a couple of dollars, but with product already in the stores, suppliers are holding prices for now.

NPK/PK sales are significantly down year on year and blend prices are extremely competitive compared to raw material costs.

Buyers for grassland fertilisers are yet to enter the market, however when they do, this will boost demand greatly.