WHEAT

USDA produced a mixed bag of a report yesterday, with wheat deemed mildly bearish, corn slightly friendly and soy a mixture of the two.

US wheat stocks were increased as USDA lowered exports more in line with reality, also raising global stocks on reduced usage in India.

However, US stocks of corn were reduced by 225mln bushels as USDA projected higher usage for ethanol and ramped up exports on the perceived lower South American production.

The major surprise of the day was the minimal reduction in Brazil’s corn crop, down just 0.5mln t to 84.5mln t against CONAB’s (Brazil’s equivalent of USDA) 87.3mln t.

After the report, the wheat market traded lower, then recovered into the close before trading lower again this morning, giving an unchanged value on the week.

EU MATIF prices are about €4/t lower on the week, as global weakness pulls levels lower. The spike in prices last week didn’t correspond to higher cash premiums, which actually fell over the period, weighed by an ever-slowing EU export pace. In addition, the recent cold snap that hit most of the Black Sea region has abated, freeing up Russian logistics and lowering export prices.

EU exports are still reported to be over 20% lower year on year, although the recent rise in Argentinian prices should ensure that the majority of recent and further tenders should go to the French.

Egypt came in with another spot tender, securing all the tonnage from the Russians, albeit at prices which reflected a hefty increase on their previous tender.

In the UK, LIFFE has gained another £3/t on the week, with currency slightly weaker against the euro, and unchanged against the US dollar. Market news came from reports that one of the country’s ethanol plants was re-opening, but details on the scale of operation and timespan were unclear.

However, the sheer fact it was re-opening seems to have driven potential cash sellers onto the back burner, although market shorts and end-users still seem unwilling to chase the market higher.

Gleadell comment:

USDA gave us a bit of everything, but the corn report was the one that caught the eye. If the perception of USDA is to throw all South American production losses and reduced export availability straight into the US’S export book, the assumption that USDA is out by almost 7mln t against CONAB could dramatically adjust the US balance sheet. That could have greater significance over the upcoming US spring planting season.

Until yesterday, the thoughts of the trade were for fewer corn acres and higher soy, but now that may all change. For wheat, the extra inventories will give the US a bit more security against perceived new crop losses.

For some time, the market has been reporting that wheat, on its own, didn’t have a story and needed help from outside markets. That remains the case.

OSR

All eyes were on the latest USDA report last night, and in particular by how much the Argentine soybean crop would be cut.

The market was expecting a figure below 46mln t, and Buenos Aires Grain Exchange (BAGE) had even suggested a figure of 42mln t, but in the end the market was left with an uncontroversial figure of circa 47mln. This was deemed neutral to bearish by the trade, and CBOT soybean futures have drifted lower as a result.

However, questions remain about market ability to replace the potential downturn in soymeal production in Argentina, even with some imported Paraguayan soybeans. Brazil and the US have plenty of beans, but if their logistics and crushing capacity are at their limit, soymeal could have more upside.

Rapeseed prices have slipped back again with the MATIF down €5-7 on the week. The downturn was prompted by weaker soybeans, as the European rapeseed market was forced to refocus on the bearish supply situation. If the market is going to find support, it will need to come from a tangible northern hemisphere crop issue.

UK farmgate prices benefited from the decline in sterling during the past seven days, as Teresa May and Boris Johnson failed to impress the Europeans or the financial markets with their latest plans for a cushioned exit from the EU, pushing sterling back to the bottom of its recent trading range.

However, we wouldn’t be surprised to see sterling start to re-gather some upward momentum and would suggest any unsold old crop is priced up sooner rather than later.

FERTILISER

Granular Urea

Internationally the market eased slightly at the start of this week as a lack of demand helped soften prices.

Fundamentally the market still remains short of urea for March/April and, with significant buying to come from late March onwards, prices are not expected to see a large slip.

With the late winter weather delaying first applications in the UK, demand for nitrogen top-ups remains low. However, suppliers are comfortable and will be able to maintain price levels as availability of urea is tight.

Ammonium Nitrate

Markets across Europe remain quiet and prices unchanged.  In the UK, CF continues to offer a flat price for March and April delivery. A small tonnage of DoubleTop remains available, but expectation is that this will sell out quickly.

Deliveries

The poor weather of last week, which has continued in certain parts of the country, has pushed first applications back. 

As a knock-on effect, top-up enquires, which usually occur this time of year, are yet to emerge, and with grassland buyers holding off buying there is still a large amount of demand to surface.

Concern among suppliers is growing about servicing this market in a smaller window and the potential for a delivery bottleneck is growing. Advice would be to take advantage of the flat pricing and secure any further requirements, rather than postpone buying and risk a delay in deliveries.