WHEAT

After setting yearly lows in the middle of December, US markets have staged a steady recovery over the Christmas period and during early sessions in the new year.

However, US exports remain routine and competitively priced US wheat is not translating into additional export business, which remains a long-term worry for US traders.

At present, though, winter weather has a grip on the market as the Southern Plains experiences its first real cold weather blast, seen as posing a threat to winter wheat sowings. This, coupled with mounting dryness concerns leading to declining crop condition reports, has seen some signs of fund short-covering, although the funds still hold a hefty short position.

EU prices, after hitting yearly lows in the last trading session of 2017, have also tried to rally, supported by the firmer US market. However, the rise in the euro against the US dollar has limited gains.

Abnormally warm weather continues to allow a record pace of grain exports from the Black Sea region, which in turn is keeping a lid on cash prices.

While this remains a negative factor to EU values, the flip-side would be the crop’s vulnerability if the unseasonal warm/hot weather turned to normal winter conditions.

The UK market is still getting up to speed after the festive break. The main news over the past two weeks was the release by DEFRA of the final 2017 crop area, yields and production. Wheat yields were reported 5% higher year on year at 8.3t/ha, with increases in all regions, except for the north west and Merseyside.

This compensated the 1.7% yearly reduction in acreage, resulting in a provisional production figure 3.2% higher year on year, at 14.8mln t. Adopting that crop number, together with uncertainty remaining over the re-opening of one of the UK’s ethanol plants, would potentially push end-season stocks towards 2mln t.

In summary, the weather is back in the driving seat, with the cold blast in the US, and concerns over dry conditions in Argentina. The size of the fund short has been the major technical support to a market struggling from a fundamental standpoint.

However, with the USDA due to release another decline in US winter wheat plantings next week, the recent icy blast and talk of lower US winter wheat production could ignite a further bout of fund short covering if crop impact is evident or perceived.

OSR

The oilseed picture remains in a state of flux. South American weather worries remain a concern, with areas of Argentina and Brazil remaining hot and dry.

Forecasts point to rain in the 10 to 14-day outlook, although the trade remains nervous as precipitation never seems to move from the deferred forecast into the nearby.

Argentine plantings are 82% complete, with progress steady to standstill, awaiting moisture for more suitable seedbed conditions.

In the US, soybean stocks remain plentiful, and with reduced exports year-on-year, many feel that crop losses from weather issues will be cushioned in the global supply and demand.

A rally in the Matif market yesterday is due to short covering/profit taking, having seen a 10% reduction in value over the past two months, and a better crude oil price. Even with a weakening pound/euro rate UK prices struggled to find support, with UK crushers reluctant to buy and the trade seemingly well covered.

The USDA report next week is expected to be bearish, so unless we see a surprise figure, prices may continue to feel pressure.

FERTILISER

Granular urea

Markets remained quiet but firm over the festive period. The Indian tender before Christmas bolstered prices further and, with spring buyers set to return to the market, producers are now comfortable with the amount of stock sold for January. This will help keep the market firm.

The virtual halt to Chinese exports has put a heavy reliance on Iranian origin urea into Asian markets, and to date, Iranian suppliers are covering all of the urea bought under the Indian tender on the 22^nd December.

It remains to be seen what effect the civil disturbances and protests in Iran will have, but buyers in Asia are concerned that any cutbacks in Iranian shipments would tighten the urea market further. Replacing this tonnage would be a major challenge to buyers in the first quarter of 2018.

In the UK, stocks are limited, and prices have tracked the global market higher. Gleadell has a vessel of Egyptian origin urea loading at present so can offer urea at excellent value for January/February delivery.

 Ammonium nitrate

CF has posted new values for February delivery, holding prices for now at January levels. A limited tonnage of Nitram is available for January delivery at an early movement discount to the February terms, and once this is sold this offer will be withdrawn.

Long-holders of imported AN continue to move stock at a discount to UK product. However, tonnes remain limited, as high replacement prices restrict the competitiveness of new vessels.

Courtesy Gleadell