The surge in US prices after the surprise purchase of one cargo of US soft red winter wheat by Egypt has been cancelled out by a firmer US dollar and continued sluggish US sales/export data.

Confirmation by the Russian agriculture ministry of higher total grain export forecasts, especially of wheat, have added to the downward pressure. Respective figures now stand at 38-39mln t and 33-34mln t due to an improved harvest outlook.

European markets edged lower this week, although the fall has been buffered on the back of the lower euro/US dollar rate.

Exports to non-EU countries continue to drag. According to reports they remain 25% down year on year, pressured by low Black Sea prices and the strong pace of export from that region.

With most key import consumers now covered until the new year, the next threat to EU exports appears to be from new-crop Argentine wheat, although lower FOB spreads and higher freight spreads will attract a bit more Moroccan and African business back into the EU balance sheet.

The UK market is still feeling the impact of the Ensus closure, with merchants, especially in the north, looking to place wheat originally destined for the ethanol sector.

Delivery premiums continue to shrink, although this is also partially due to an increasing technical November futures position. The recent slip in sterling had given UK prices a bit more competitiveness, albeit before yesterday’s and this morning’s surge in sterling, on reports that a post-Brexit financial services deal has been agreed with Brussels.

The recent bioethanol plant closures, coupled with talk of a sharp increase in UK wheat plantings for the 2019 harvest, suggests that the UK will have to become export competitive some time this season. However, given the continued uncertainty after 29^th March 2019, on what terms we can export, and with whom, remain unknown.

David Sheppard, Gleadell’s managing director said:

"In summary, one US SRW wheat cargo won’t dramatically change the US export outlook, and the EU continues to bow to Russian export prices with little scope for a substantial increase in export activity. Both ask the same question – how long will Russian wheat be aggressively offered?

"The answer lies in the hands of officials, but until the market is given evidence of export volume being switched from Russia into the export books of either the EU or the US, market rallies will be hard to sustain."

OSR

The US soybean harvest continues to put pressure on the global oilseeds market, with the lack of export demand really starting to bite.

The imposition of the 25% tariff by China on all US soybeans is starting to create a backlog and, whilst domestic usage is doing all it can, the market is struggling to find space to deal with the volume.

In Europe, the November Matif futures went off the board with a whimper, as low water levels throughout the inland European waterways have all but killed demand as it has become very difficult to move any rapeseed around.

The underlying fundamental market for rapeseed remains bullish and, if reports about the Australian crop are correct, the European market may be struggling for supplies come the new year. However, as always, trade politics and currency make things far from clear.

FERTILISER

Granular urea

The Chinese environmental ministry has announced further plans to tighten regulations controlling pollution this winter.

Tighter constraints will apply to fertiliser manufacturers in the country, curbing production further. Production cuts in the last few months have coincided with weaker domestic demand, but the move could push prices up as buying commences for the spring application period in China.

Egyptian producers have remained quiet this week as it is thought they have committed the majority of November tonnes. One producer has announced a tender to sell 25,000t for the second half of November and is targeting $335-340/t FOB Egypt. This would put replacement urea at around £330/t on farm in the UK.

UK prices continue to trade below that level after a spell of low demand. However, interest is increasing and, with importers finding it difficult to buy new vessels of urea at competitive levels due to the firm global market, stocks in the UK could start to tighten.