This report is provided by our Marketing Partners Frontier Agriculture.
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Official figures from France illustrate the issues that the current weather pattern is having on 2020 harvest potential in the west of Europe. In its weekly update on Friday, FranceAgriMer advised that French farmers had only advanced their winter wheat planting by 3% to 74% complete, compared to 97% this time last year. Additionally, there was a sharp drop in the crop ratings, with 78% seen as 'good' or 'excellent' which is down 6 points on the week and 4 points on last year.
The UK enjoyed a few dry days earlier this week, allowing land work to resume in some areas. Winter wheat drilling has progressed where conditions have allowed, whilst vast areas of the worst rain-affected counties have remained sodden. Establishing accurate data for the UK winter wheat area is difficult. However, the overall progress this week was not significant.It is increasingly concerning that almost half the winter wheat seed still remains to be drilled.
The excessive rain and drilling issues in Western Europe have not stopped the International Grains Council (IGC) increasing its forecast for the 2020/21 world wheat area. It has predicted a 1% increase to a total world wheat area of 218 million hectares, driven higher by a notable expansion in Russia. However, prolonged dry conditions will lead to a fall for Ukraine's winter wheat area. It is important to note that Ukraine and Russia remain dry with low soil moisture and exposed crops. These dry conditions that prevail currently in Ukraine and Russia leave the crops vulnerable.
Algeria encouraged European markets this week, buying what was estimated to be between 500,000 and 550,000 tonnes of wheat. Algeria is traditionally supplied by France and its total wheat imports this year will reach 6.2 million tonnes. However, the Algerian government has since stated that it will cap future annual wheat imports at 4 million tonnes.
Short-term demand from the EU before the next Brexit deadline at the end of January is limited, with many origins already covered for both feed and malting barley. Third country demand for feed barley only – in the form of Saudi and Tunisian tenders – did exist last week, but firmer currency and increased competition from Southern Hemisphere origins both impacted the competitiveness of UK export values. The UK still has a significant exportable surplus of barley to export despite a high pace of exports leaving the UK over the first five months of the crop year. This will have to continue at a decent pace if the surplus is to be cleared before harvest of crop 2020 begins.
Winter drilling for crop 2020 continues to be plagued by unsettled weather, particularly across central regions of the UK where it is estimated that there are still areas of land too wet to work. The unsettled weather has not only impacted areas that have not been drilled; areas that have been planted have seen winter barley sit in sub-optimal, heavily saturated seed beds and there is more unsettled weather forecast over the weekend.
US soybean futures prices have dropped by over 3% this month whilst efforts to find a solution to the ongoing trade dispute between the US and China continue to end in frustration. Markets have slipped to their lowest level since the end of September and, with the recent United States Department of Agriculture (USDA) report confirming ample global stocks of not only soybeans but also sunflower seed and rapeseed, a market recovery in the near-term looks unlikely.
Sterling has been marginally firmer over the past month but domestic rapeseed prices have been remarkably robust and look set to record modest gains. Continuing demand for imports and the poor state of crops in the ground are both factors that are currently preventing the build-up of selling pressure. Longer-term concerns centre on plentiful global stocks, the seemingly never-ending US/China trade dispute and the possibility of firmer sterling after next month's election. Domestic markets cannot ignore weaker fundamentals in the world arena indefinitely.
Old crop bean markets continue to crab sideways with no sign of improvement in feed values. It seems that any monthly carry will soon be eroded and we will be looking at the same values after Christmas. There are still active buyers for good quality spring beans for export to Sudan but, with very few samples good enough to make this quality and a limited export window, this market will soon close.
It's been a better week this week with at least a couple of dry days to get some more seed drilled. Demand for fertiliser has picked up a little, with some areas of the UK well on with drilling. CF Fertilisers and Yara have continued with the previous week's pricing structure, with both companies watching the urea market. India has concluded 1.76 million tonnes of urea purchases in the recent tender, with products required by mid December. So far the urea producers are sorting those orders, but no doubt they will have more chance of moving levels higher given that demand. Other regions of the world still have big tonnages of urea to buy and they may move quickly now that India is out for a week or two. Some buyers will be watching the calendar and will need to move quickly to get products onto farms ready for spring applications. Speak to your Frontier contact for more information.
Sterling versus the euro touched £1.17 this week, leading some European-supplied raw materials to weaken again. Demand remains low so, again, it's a buyer's market but buyers are few. Contact Frontier for current terms.