WHEAT 

US wheat prices are slightly higher on the week, mainly due to overspill support from firmer corn and soybean markets resulting from last weekend’s agreement between the US and China to suspend new tariffs for 90 days to prevent the trade war from escalating.

However, the agreement is open to interpretation. China would also need to open up its vast market, and Chinese buyers still comment that US bean import tariffs need to be eliminated before they will buy.

Australia pegged its 2018 wheat production at 17mln t. This was higher than expected, as losses caused by adverse weather experienced during the sowing/growing season appear lower than originally feared.

EU prices are slightly weaker on the week, not helped by news that Egypt’s state buyer GASC failed to secure letters of credit for at least 16 cargoes that have been purchased, causing delays in payment and confusion among suppliers.

Following reports from the Finance Ministry that nothing would be done until January, shippers have been asked by GASC to delay December arrival shipments until January.

Reports that Russia will send trial cargoes to both Algeria and Saudi during the next four months, looking to boost exports, is seen as a long-term threat to the EU, as the country has struggled to break into this market due to historical quality issues.

The importance of these markets is demonstrated by the fact that half of EU external exports to date this year have been shipped to these destinations.

The UK market is up about £2/t on the week, with the market still focused on the Brexit vote next Tuesday. Market fundamentals continue to tighten as the festive period nears, as fresh farmer selling, and lorry availability, lessen.

Long term, the current price structure would indicate good values to growers, although next week’s Brexit vote, and any currency implications, will influence the next price direction.

David Sheppard, Gleadell’s managing director, commented:

"In summary, the US/China ‘deal’ could be read either way, but it seems to have been taken favourably by US traders.

"The suspension of the tariff increase is not a suspension of the trade war, it is a suspension of any escalation of the trade war. If the parties don’t agree in further talks, increases are likely to be imposed.

"EU markets continue to watch signs of falling Russian exports. In the UK, it remains all about Brexit and the key vote next Tuesday."

OSR

The news this week has been dominated by the announcement of the temporary cessation in the US/China trade war following the G20 summit last Saturday.

This was initially expected to be very bullish for US beans and a catalyst for sharply higher prices, but the reality has been rather disappointing as traders pause to assess the reality of this deal.

It is still not at all clear what will happen and when China will start to engage. The US Agriculture Secretary has said that it is “yet to be determined” whether the tariffs on soybean imports will actually be removed. The lack of clarity has sparked a significant sell-off in the US stock market.

In Europe, rapeseed futures found some support as news filtered into the markets that the EU is considering re-introducing the anti-dumping levies on Argentinian bio-diesel,.

However, in the UK the main story is still Brexit and its effect on currency. The currency market was reportedly pricing in a 15% possibility of a tweaked Brexit plan getting through, but some pundits are now suggesting that it is a 50:50 call.

If it does succeed, the resulting transition period should be supportive to sterling and negative to UK farm gate prices, but what will actually happen next week is still far from clear.

FERTILISER

The international urea market is slow as buyers remain on the sidelines, watching prices continue to trade sideways.

Very few sales are being reported for December. The lack of business is likely to put some downward pressure on pricing, as manufacturers still have more tonnage to place.

Despite a forecast increase in demand this season, both the European and UK nitrogen markets remain behind normal as the year draws to a close.

This suggests a very busy January-March period, which would move the market towards being a sellers’ market.

Farmers should be looking at today’s buyers’ market for opportunities, as prices will get squeezed when buyers return in volume.

CF’s nitrogen, nitrogen/sulphur and full range of NPK products are on offer today for February delivery. These all remain a very good buy.