Commodities Update (07/09)

The pound has plummeted to its lowest level against the US dollar since 1985. Sterling fell 0.64% to $1.145 this afternoon - a level not seen in 37 years.  The Bank of England said a weaker outlook for the UK economy, as well as a stronger dollar were putting pressure on sterling.  This will impact on the import and export of agricultural commodities.

The Government has warned that little can be done to stop the UK falling into a recession this year as the war in Ukraine continues.

Gas - Yesterday’s trading of natural gas futures touched 558.00p/therm, jumping 38.6% on Friday’s (05 Sep) close of 402.42p/therm. However, trading closed yesterday at 462.60/therm. This is a 245% increase on the same point last year according to ADHB.

After several trading periods of falls the GDT has seen an overall gain of +4.9%. (Anhydrous Milk Fat +13.9%, Whole Milk Powder +5.1%, Butter +3.3%).  This should take pressure of any thoughts of a drop in milk price this winter.

Brent Crude has fluctuated over the past month, today’s price is just under $90/barrel, which is the lowest since the start of the war in Ukraine.

Milk Powder
The milk powder price has stabilised over the past month, with no increases for September.  If the GDT continues to rise this could put upward pressure on milk powder prices, so may be worth looking to order now.

Fertiliser
Russia has been curtailing gas exports in response to Western sanctions over its war in Ukraine causing high wholesale prices and a shortage of gas. Recently Russian owned Gazprom announced a further cut in gas flow through the Nord Stream pipeline for 3 days, siting maintenance as the excuse. This is stoking fears that Russia could halt flows completely heading into the winter heating season.

Europe’s ammonia production capacity has shrunk further with more reductions expected as two Polish companies joined a growing list of fertiliser manufacturers cutting/stopping production due to the souring gas prices. Grupa Azoty (Polands largest chemical company) and Anwil have cut production. This means around 38% of Europe’s production capacity for Ammonia is now restricted.

Traders expect European gas prices to remain elevated for years to come, forcing the high cost of Nitrogen and reduced production. This has triggered Urea imports from countries less affected by Russia’s control of gas. We are seeing supplies from non-traditional markets such as US, Gulf & Indonesia where quality is untested to European expectations.

Our supplier remains committed to the UK market for continuity and quality of supply; sourcing Egyptian Urea and Spanish 27N + 12SO3 & ASN 26N + 37SO3 compounds from Feriberia.

Feed
Markets remain volatile, with no clear direction on a daily basis, again due to talk of the Nord Stream pipeline halting flow.

This morning cereals are £8/T up as Putin is disappointed that only two vessels from Ukraine have gone to Africa, so is threatening to shut the corridor, hence the market reaction causing volatility.

 Proteins

• Soybean/meal prices lowered on the prospect of more Argentine exports after the country offered a preferential exchange rate for soybean exports for the rest of September.
• European Union soymeal imports for the 2022/23 marketing year are trending below year-ago totals, with 2.73 million metric tons.
• US soyabean crop prospects are looking favourable ahead of harvest, which will put some downward pressure on the market in the short-term.
• Large Canadian rapeseed crop expected shortly.
• Longer-term large South American crops are forecasted, combined with recessional fears playing into reduced demand, could pressure the market downward.

Cereals

• Traders continue to weigh up larger-than expected export volumes out of Ukraine (set to exceed 5Mt in Sept), a record-breaking Russian crop, and global macroeconomic uncertainty.
• Predictions of a Russian wheat crop of up to 100Mt which, if realised, would be a gain of over 10Mt on estimates from earlier in the year.
• Since the start of the export corridor the Odessa ports exported 1.55Mmt of grains and oilseeds (of which 1Mmt is maize). A total of 87 ships left the ports, with most destined for Spain, Turkey and Egypt.
• Ukrainian Agrarian Council said that the country’s 2023 wheat sowing area could fall by 30% or 40% due to a lack of funds to nearer 15MT (compared with 32.2MT in 2021)
• Dry conditions in US plains are still a concern and could damage the wheat/maize crops
• Rising maize prices supporting wheat markets.
• In France, maize harvest has begun much earlier than normal with an estimated 45% of the crop being in ‘excellent’ or ‘good’ condition, compared to 91% a year earlier. This score is the lowest rating in more than 10 years (FranceAgriMer).
• UK wheat following French wheat due to weaker Euro

For up to date prices please contact Louise on 07943 684215 or e-mail louise@dblbuyinggroup.co.uk