16 June 2011

Grain Markets - David Sheppard, managing director image expired

Ukrainian Agriculture ministry cut the 2011/12 grain export forecast to 15-18mmt, from 19-20mmt previously.

UkrAgroConsult slightly raised its forecast for the 2011 grain harvest to 45mmt with wheat estimated at 20.42mmt.

Russian Grain Union predicted its 2011/12 grain crop at 80-93mmt, which all depends on the weather.

Argentine farmers are making good progress with 2011/12 winter wheat plantings, taking advantage of moist soil conditions.  To date 22.5% of the planned 4.95mln hectares have been planted, up 6% on this time last year. The government has also approved the export of 3mmt of 2011/12 wheat for shipment starting in December, authorised only when farmers have declared enough stocks to guarantee plentiful domestic supplies.

The Spanish Secretary of State for Rural Affairs anticipated their harvest at more than 20-22mmt, up from 19.7mmt in 2010.

French farm office AgriMer projects French soft wheat production falling 13% to 31mmt, down from 35.6mmt in 2010. They also gauged yields at 6.15t/hectare, down 15% on the year with 2011/12 closing stocks of around 2mmt.

The USDA estimated corn plantings at 99% complete, up 5% on the week, with crop rating improving 2%. They also said spring wheat plantings had reached 88%, up 9% on the week, but behind the average of 100%. The spring wheat crop was rated as 68% in good/excellent condition. The winter wheat crop was rated as 35% in good/excellent condition with 22% harvested, ahead of the 5-year average of 13%

The USDA report released last week was full of surprises, as global wheat stocks were raised for 2011/12, but corn stocks were dramatically cut for both the US and Global estimates. For wheat, despite a 5mmt cut in production (mainly due to a 7mmt drop in the EU), World ending stocks rose 3mmt, as lower feed projections for 2009/10 and 2010/11 added 5mmt to existing stocks in Russia. Corn was driven by higher than previously reported use in China which has slashed stocks to just over 51mmt, down 12mmt from last month’s report. With global corn stocks also projected now at only 112mmt, down from 129mmt last month, with China having 46% of the world’s total available stock. US corn production was lowered because of smaller acreage as yield was left unchanged despite the late planting season.

This week the markets have seen profit taking as the on-going US harvest and week-end rains boosted the outlook for EU crops, bringing some relief to stricken crops in France and the UK. Price pressure has also resulted from the fact that US corn plantings, albeit lower than previous projected, are winding up and the improved weather outlook is expected to give the crop a boost, along with general lower commodity and oil prices.

Last week the USDA report raised more questions than answers. Traders will digest the numbers and try and form a new strategy for where prices go from here. Corn stocks are now extremely tight, if they weren’t before, and some price rationing within the US will need to take place. Wheat stocks according to the report and better weather prospects now seem to point to a short-term ‘bearish’ sentiment. 

However, in the long-term, tight corn supplies and ‘available wheat supplies’ (major importers / India now hold 57% of stocks) will support the markets. With the major 5 exporters (US / Argentina / Australia / Canada / EU) holding only 44mmt of wheat, or 24% of the total stock, the World needs all of the total export potential from the FSU (26.3mmt), and any signs of export restrictions from this region will ignite further buying speculation. After all, crops, especially in the EU / FSU are not made yet and there remains a lot of weather between now and harvest.

Oilseed markets - Jonathan Lane, trading manager 

European rapeseed futures are lower this week as support in the market is eroded due to poor crush margins and lower demand.

Oilseeds in general, however, remain torn between bullish and bearish driving forces: 

Bullish ideas include the uncertainty about crop yield prospects globally, the lack of cushion in stocks to offset a major weather problem and a strong corn and ethanol market. 

Bearish factors include concerns about the impact of high crude prices on economic growth, China’s import pace (particularly in the face of tightening measures), general shrinking export estimates for US Soybeans and the historical fact that high prices often discourage consumption.

Soybean futures moved early this week on speculative selling. The USDA report for wheat and soybeans lacked any bullish surprises, enticing traders to take profits with ample supplies and slower export demand limiting buyer interest.

Seed - Stuart Shand, sales director

The Cereals event will give many growers their opportunity to have a detailed look at the varieties for the various commodities as a part of their cropping plans for next year. Once this is done - there will be renewed interest in covering requirements as the message that will come across is that certain varieties will be in short supply this year and we are already seeing many winter barley varieties moving to limited stock and in certain cases sold out.

Premiums on new varieties have narrowed with the base price increase over the past couple of weeks and as a result we are seeing good demand for these, including the new Group 3 soft wheat variety Tuxedo, a high yielding premium variety, with a wide sowing window and consistent yields across many farm situations, including first and second wheat. The variety is ideally suited for both domestic biscuit and the export market giving it a strong position in the market place.  Tuxedo is available with a very attractive buyback contract.

Demand also continues for the new highest yielding feed wheat variety KWS Santiago. The variety is 2% higher yielding than Oakley, therefore for anybody looking for an out and out barn filler, this is the one.

Many people will be keen to see the winter oilseed rape plots - the commodity offers an excellent gross margin opportunity and as such we would foresee crop plantings remaining at their record highs - Gleadell have priced terms available on a wide range of varieties, including hybrid and conventional types.

Fertiliser markets – Calum Findlay, fertiliser trader image expired

The Urea Market has gone into overdrive and prices are spiralling upwards on a daily basis.  The primary driver is still demand outstripping supply on a global basis, with a substantial shortfall likely in the short term.  Chinese sellers are reluctant to commit to export, adding considerable heat to an already very hot market. 

References to the rises being unsustainable are more common this week. However, there are still no signs of weakness.  An Indian tender announcement appears imminent and there is clearly demand in Latin America to be satisfied.

It is believed that the nationals in France will be releasing their new August price at a €40/tonne increase.  We will see UK at £335-340 on farm and these prices could see the AN market go into turmoil.

Global Phosphate supply is tight, with prices surging on expectations and China export controls will starve the market of product it has grown to rely on.

Gleadell have Granular Urea to offer in all positions for new season, at a very sensible price. This should be considered as a source of N in most situations - especially on a cost per unit basis when compared to UK Ammonium Nitrate levels today.