This report is provided by our Marketing Partners Frontier Agriculture.
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This week the Department for Environment, Food and Rural Affairs (DEFRA) published its final UK wheat area, yield and production estimates for 2019. There were minimal changes to its provisional estimates but the report included a reminder of how significant the crop was at 16.225 million tonnes.This is just 58,000 tonnes below the provisional estimate – the largest UK crop since 2015 and 2.67 million tonnes up on the 2018 harvest. Allowing for a minimal commercial carry out on paper, there is an exportable surplus of approximately 2.9 million tonnes. With 900,000 tonnes of that likely to be shipped by the end of this calendar year, there will be approximately 2 million tonnes to either compete for export or roll over to the 2020 season. The market may need this roll over to meet next season's customer demand due to the continued rainfall and waterlogged fields seen at the end of this year.
In its December 2020 wheat crop estimates, leading analyst, Stratégie Grains reduced the German winter wheat area marginally on last year at 3.07 million hectares. However, the Federal Statistical Office of Germany surprised markets this week, reporting the area had reduced by 7.1% on the year at 2.83 million hectares. In contrast to the UK, drilling conditions have been favourable but German farmers preferred to increase their oilseed rape area at the expense of wheat. Germany is the EU's second largest wheat producer and these cuts follow the sharp falls in the wheat areas for France and the UK due to adverse weather.
UK millers typically buy up to 300,000 tonnes of German wheat annually which is mostly high quality grades with 13% - 14% protein. German traders reported making forward sales to the UK for 2020 already and it would seem likely that volumes will be much greater than normal because of the continuing planting difficulties and poor condition of drilled crops in the UK.
Prospects for a tighter 2020 EU balance sheet helped French wheat futures rally €3 this week, whilst an increasing demand for UK wheat imports saw London futures gain £5 per tonne.
In contrast to the continuous heavy rain impacting the UK and France, Ukraine has experienced an extremely dry autumn. As a result, Ukrainian farmers have reduced their winter wheat planting and it is thought that winter wheat drilling on average is 10% down on the year. Planting was down by as much as 39% in the Kiev region. However, the crops have established reasonably well, with 88% in 'good' or 'satisfactory' condition.
Improving prospects for a resolution to the US/China trade dispute provided a boost to agricultural markets this week. It is reported that the US and China would sign their 'phase one' trade pact in early January.
Firmer sterling off the back of the General Election result put pressure on UK feed barley values at the end of last week. However, parliament has since announced that it is looking to implement legislation to make it illegal to extend the Brexit process beyond December 2020. Currency weakened as a result. The Agriculture and Horticulture Development Board (AHDB) confirmed its final 2019 barley crop number on Thursday at over 8 million tonnes. Although not the largest production statistic in the last 20 years, an average winter and spring barley yield of 6.9t/ha represented the highest seen across this period. The UK has exported feed barley at a high pace from July to December - this exportable surplus will continue to be moved in the New Year, with volatility from the currency markets significantly impacting UK export values.
The malting barley market remains quiet heading into the new calendar year, where the focus will soon shift to crop 2020 with a potentially sizeable increase in spring barley plantings.
After an eventful few weeks which have seen a 'phase one' trade deal reached between China and the US, alongside the UK General Election result which has impacted the value of sterling, the market is showing no signs of winding down over the Christmas period. Physical rapeseed prices into the key Liverpool crush market have jumped £14 per tonne since Monday, whilst US soybean markets have surged up 7% since the start of the month. Meanwhile, French rapeseed futures are trading today at €405 – €33 up on values trading as recently as the end of October.
Undoubtedly, future prospects for domestic OSR prices are intrinsically linked to the fortunes of world oilseed markets. China accounts for more than 57% of world soybean imports and traders are now reassessing the prospects for increased shipments for the US. As a result, their 2019/20 year ending stock levels will be reduced. Rain is forecast for some key production regions in Brazil but Argentina's export potential continues to be constrained by dry weather and increases in export taxes.
Our final oilseed report of the year allows us to reflect back on 2019. In January, OSR for delivery to Liverpool in December 2019 was valued at £330 per tonne delivered, with the current value now at around £348 per tonne. Throughout the year, our domestic market has shown remarkable resilience when other arable farm commodities have been under severe pressure in comparison to the favourable cereals prices enjoyed in 2018. Looking forward to harvest 2020, the prospects remain positive for all UK growers of rapeseed.
Markets remain subdued but increased demand from India and interest from Europe has led to some strengthening in values of North African exports. To some extent, this has been offset by the strengthened value of sterling. However, we are getting close to application time and importers of both urea and ammonium nitrate are reporting that the next earliest arrival times for new product into the UK are well into February.
CF Fertilisers and Yara are still keeping a close eye on a number of factors, including import pricing, currency, gas prices and local demand before posting any new levels for January onwards. New prices are not expected until early January.
Prices have weakened slightly on the back of stronger sterling but these new levels are not expected to remain for long once we get into what is expected to be a busy spring season for the blenders/importers. We would advise you to speak to your Frontier contact to book your requirements now.
With a larger than normal acreage of spring crops expected this season, careful attention should be paid to choosing the right products and programmes to suit your crops and end market requirements. Sulphur Gold is a very flexible option when looking to apply nitrogen and sulphur to a mix of crops and, where no P & K have been applied in the autumn, a compound NPK +S should be considered.