WHEAT            

As the US returned from its Thanksgiving holiday, traders sold both the wheat and corn markets, pushing prices to contract lows ahead of first notice day.

Although demand for US wheat remains sluggish, with current export shipments down 6% year on year compared with the perceived 5% reduction projected by the USDA, pricing of better quality is seen as competitive against other origins. It may feature in the upcoming Saudi tender.

USDA in its baseline projections reported the wheat acreage is likely to decline further, putting the area to the 2018-19 marketing year at 45mln t, down from 46mln acres this season.

That reduced area and declining winter wheat crop ratings should provide support long-term, although the forecast is seen bringing moisture into the main growing states, which in turn may reduce current dryness concerns.

EU prices, like the US, traded down to fresh contract lows this week, before bouncing higher.

In its latest tender, Egypt again purchased only Russian wheat, with the Romanian offers seen between $5-10/t too expensive.

Although it is envisaged that France will get the majority share of the Algerian business, it is thought at least three Argentinian cargoes were included. The Saudi tender will test how much German/Baltic quality wheat is left, with US hard red winter wheat seen as a potential alternative.

UK futures on the week had been down £4/t, as news of a Brexit divorce bill settlement sent sterling sharply higher. However, despite sterling remaining firm, futures have recovered on the general global bounce and are currently trading just £2/t lower on the week.

While the drop in futures encouraged some better sellers in the deferred position against few buyers, spot prices hardly moved as merchant shorts bid for supplies into an increasingly logistical-driven market.

In summary, all US and EU markets hit contract lows this week, and that includes the UK over the calendar year. But do markets feel they are at the bottom?

Recent tenders (Egypt/Algeria) show no shortage of global cash wheat, and the trade will determine whether the bounce is the start of a firmer trend, or just another ‘dead cat bounce’.

Long-term prospects have signs of supportive factors (US plantings/crop ratings and the fund shorts), but short term it’s all about too little demand and too much supply.

OSR

The CBOT soybean market drifted on the week on relatively light volumes. However, we are maintaining a close eye on developments in South America as dryness, particularly in Argentina, is starting to raise some concerns.

In Europe, the rapeseed market has fallen sharply this week. At the time of writing, Matif rapeseed futures are down circa €7 on the week, as crushers are largely covered in the nearby positions and crush margins have started to ease from the recent highs.

In the UK, currency continues to dominate farm gate price movements. Sterling had drifted as domestic political instability had created some nervousness in the money markets. However, following reports in the Telegraph on Tuesday evening that Brexit negotiators had agreed an outline agreement on the divorce settlement, sterling rallied sharply against the euro and was up nearly 2.5 cents on Thursday afternoon.

The perception is that, with the divorce settlement agreement, negotiations can move towards trade and the wider issues that will affect the UK’s long-term economy. However, with the Irish border and labour movements still to be finalised, the volatility in the currency will remain.

FERTILISER

Granular urea

The recent up-tick in the granular urea market had encouraged producers that had previously reduced output to start manufacturing at capacity again.

However, with India cancelling its recent tender, some of these manufacturers are now looking to move material, and values are coming under some pressure again.

We expect to see India and other buyers being forced back in to the market soon, and view the current dip in prices as a good opportunity for those with material still to buy.

Gleadell is in a strong position, having vessels loading in Egypt shortly, and can offer urea at extremely competitive terms for Jan-Feb delivery.

Ammonium nitrate

CF released new terms earlier this week, indicating an increase to all prices from the previous offer.

Terms are now for a January movement, offering a discount for early January delivery for anyone that can take product. Prices remain competitive compared to European values, which are trading at much higher levels.

However, long-holders of imported product are now starting to move stock at a small discount to UK blue-bag.