WHEAT

The US market is about $1/t weaker on the week, but its next move is unclear.

USDA is expected to lower US exports and raise stocks in this week’s report, due to the ongoing slowness of exports. This, combined with large global supplies, continues to pressure markets.

However, some concerns over dry conditions in the US Southern Plains and the likelihood that US winter wheat plantings will show another yearly decline are seen as offering some support, especially given the hefty short position still held by fund managers.

European prices are marginally higher on the week, mainly due to a weaker euro. However, exports remain slow, down 20% year on year as of 2 Jan, and with Egypt continuing to secure cheap offers of Russian wheat, and Argentinian wheat priced $20/t below French supplies into Algeria, time is gradually running out for exports to dramatically increase.

France’s farm office yesterday lowered its forecast for non-EU soft wheat exports for the third consecutive month, to 9.3mln t. But, with only 2.76mln t shipped by the end of November, where they think over 1mln t per month is going is anyone’s guess!

The UK market has finally got up to speed after the festive break, although dynamics seem little changed.

Despite thoughts that the market might take a breather with the prolonged shutdown of one of the UK’s ethanol plants, end-user and merchant shorts still show good demand for spot wheat, albeit indicating their reluctance to chase the market higher or pay any market carry for deferred months.

The balance sheet would still point to adequate supplies for the season. This would suggest that growers should consider extending their selling activity at current prices.

In summary, the USDA will report, again, burdensome supplies of wheat, although some degree of adjustment on various country’s export numbers is required.

The extreme cold snap in the US has abated, although new crop dryness concerns are growing. There is also the potential of risk of winter kill in parts of the EU and Black Sea if the weather turns more seasonal.

This leaves the market open to short-covering, especially if the US planting report generates further surprises.

 OSR

The US soybeans market hit contract lows this week ahead of the latest USDA supply and demand updates this evening.

There are beneficial rains forecast throughout Argentina, which should help, but with some areas only receiving 40% of their normal rainfall through the last two months of last year, there remains a very real threat if these rains do not arrive.

However, farmers in South America are sitting on record stocks. Even if crop potential does decline, we are going to need to see a crop disaster for the currently neutral-to-bearish market outlook to really change.

In Europe, crop conditions remain favourable and in the east plantings have expanded again. The Ukraine’s winter sowings have jumped and some pundits are putting the crop in excess of 1mlnt next year.

Given the potentially burdensome carryout in the EU this year, there is a real threat that imports from the Ukraine could undermine prices in Europe next harvest.

The UK also continues to struggle with its old crop balance sheet. On paper, there is too much rapeseed left in the UK this campaign. Imports in the autumn and a better crop in 2018 have left us with a heavy supply situation and we remain a long way from export parity. Without support from a weaker pound or a major crop problem, it is currently difficult to see what is going to support our domestic rapeseed prices.

FERTILISER

Nitrogen

Markets have remained firm this week. Urea producers have started to sell February stocks and Egyptian origin urea sold this week at $266/t FOB, up slightly on January prices.

Exports from China, typically one of the largest exporters of urea, have dropped dramatically due to production cuts and rising domestic prices. Ensuing supply problems will help support markets in the first quarter of 2018, as seasonal demand increases.

Gleadell’s vessel of Egyptian origin urea is now on the water with an expected arrival in just over a week. For buyers of bulk or bagged product, there is still a small tonnage available for delivery January/early February.

Ammonium nitrate prices are unchanged on the week. CF has kept open its offer for January-delivered Nitram, offering a discount over its February terms. Where available, imported products continue to sell at a small discount to UK product. However, with a firm European market, imports remain limited.

Nitrogen markets look set to remain firm into the spring, so now is a good time to consider further UAN requirements.

NPK

Demand will start to pick up as we head towards spring and will come as a welcome relief to blenders, who have been under pressure to push tonnes into a quiet market.

January terms offer the best value currently, with February and March indicating a £5/t per month increase. Whether these increases hold will all depend on when the majority of spring demand surfaces.