WHEAT

The US market is unchanged on the week, but that alone doesn’t tell the full story. Continued weather concerns emanating from Argentina have spiked the soy complex higher, especially soymeal, with spill-over support entering the grain pits.

Additional support initially came from reports of drought expanding across the US Southern Plains, which is seen to be potentially stressing the winter wheat crop. But the chance of rain in the North West has since cooled the wheat market.

EU prices, although about a euro lower, are actually $4/t higher on the week as a weakening US dollar exerts pressure on MATIF. European cash prices have firmed, not only as a result of the recent Saudi tender but also on further rises in Russian prices on export demand from Egypt.

Russian wheat exports were placed at 21.3mln t as of 31 Dec, up 60% on last year. With favourable weather expected to continue, it is envisaged Russian values will remain the benchmark for other origins.

EU wheat exports continue their slow grind. Soft wheat shipments are reported at 12.6mln t for the season to date (as of 6 Feb), down 17.5% compared with 12 months ago.

The current pace prompted farm office FranceAgriMer to reduce its forecast of French soft wheat exports outside the EU in 2017-18 for the fourth consecutive month, to 9mln t, from 9.3mln previously, raising closing wheat stocks to 3.25mln t in the process.

UK LIFFE is trading about £1.50/t higher on the week, despite the pound’s move back above $1.40 against the US dollar. As we have mentioned in previous reports, while LIFFE seems to be currency and politically driven, day-to-day physical prices show little, if any movement.

Official data for December showed wheat exports at their lowest monthly level since July, at just 25,000t, with imports reported in excess of 115,000t.

With uncertainty surrounding the actual date, if at all, of the resumption of operations at one of the major UK ethanol plants, the UK balance sheet is growing heavier by the month. This leaves the potential for a squeeze on forward carries, suggesting nearby values still look attractive.

In summary, it’s all about weather, albeit in South America or in the US in relationship to new crop production. Funds, by the end of this week should be running with a long book on soy, but a declining short position in corn and wheat.

Until more details can be obtained on actual Argentine losses, we expect the soy markets to stay on the buy side, but how much sentiment spills over into the grain is another story, as these markets have differing agendas.

OSR

Weather concerns in South America return to the forefront, with hot and dry conditions in South Brazil and the whole of Argentina now under some crop stress.

Argentina accounted for 48% of world soymeal exports in 2017, so it is hardly surprising that reduced farmer selling has resulted in a decline in soybean crushings, which has stemmed global meal supply.

A rally in soymeal prices since the start of 2018 has moved crush margins to profitable levels, which will mean US crushers will run at full capacity. South American production has been amended down 7% year on year already, with every additional day of dryness further reducing crop prospects.

The Matif market remains isolated, with prices struggling to break out of the recent trading range. The weak US dollar against the euro has helped to counteract the soybean price rally, with MATIF values again almost unchanged on the week.

UK crushers remain aware of the heavy UK balance sheet for 17/18, with farmgate prices static to marginally supported by a slightly weaker pound/euro rate. With crop issues being confirmed in South America, there is more interest in the growing crop than the one in the shed.

FERTILISER

Granular urea

The urea market has edged higher this week and the outlook for March/April suggests this trend will continue.

A lack of exports out of China has forced prices higher in Asia, making this region an attractive destination for Middle Eastern and Russian urea.

This in turn is firming prices in the West, deterring UK importers from buying.  UK stocks of urea are starting to become low ahead of the spring.

NPK/PK

Suppliers are becoming concerned that a quiet autumn/winter period is going to lead to a larger-than-usual spring market and a bottleneck with deliveries.

To help avoid this, growers are being offered a flat price to book requirements between now and April. CF is offering this across its whole range, as well as priority delivery to those that book under the current offer rather than waiting until March or April.

With a number of product shortages already a concern, growers should seriously consider taking advantage of the current offers.

Source - Gleadall