Wheat futures edged lower on competitive Black Sea supply
The Euronext wheat milling futures DEC-24 contract price [Expana Code: WHT2] settled at €220.5/mt, up 0.92% week-on-week (w-o-w) at yesterday’s close, Sep.25 2024. This week, China announced economic stimulus measures that gave some support to the broader commodities market, although wheat remained largely under pressure due to ongoing competition from Russia. Russia remains the cheapest regional wheat source along with Ukraine. An Expana source explained, “China’s central bank rolled out a big stimulus package. They lowered the reserve requirements by 50 basis points, injecting 1 trillion Yuan into the financial system. They have also promised to cut interest rates by the end of the year. On top of that, minimum down payments for second properties will drop from 25% to 15% to boost the struggling property market. The market reacted positively to these moves this time.” Another source added, “A strong euro, weak exports and a drop in demand from the Baltics and Balkans are making things tough for Euronext. But with the dollar weakening, interest rates going down and stimulus from China, we could see more fund buying across the commodities market.”
Market participants are increasingly concerned about the Black Sea winter wheat crops, which have experienced a lack of rainfall for the past 60 days, with forecasts suggesting no significant rain for the next 30 days. Eastern Siberia and the eastern parts of Western Siberia face heavy rains, leading to poor harvesting conditions. Meanwhile, in Western Siberia and the Urals, the first frosts have appeared, raising the likelihood of further production losses for the 2024/25 season. Planting activities in Russia are also lagging schedule, according to market players. So far, 8.27 million hectares of winter crops have been sown, which is slower than typical and mirrors the situation seen in 2020 when a delayed start led to reduced winter wheat acreage in some regions. The consultancy IKAR has lowered its wheat production forecast for Russia’s 2024/25 season to 81.8 million mt, while other market estimates range between 80-83 million mt.
In Ukraine, soil moisture levels for winter wheat plantings across most regions of Ukraine are reported to be “extremely low,” raising concerns for the upcoming crop. As a result, only around 50% of the wheat is expected to reach a protein content of 11.5%, with the majority having an average protein level of 11.04%, a slight increase from 10.98% in 2023. Market players report that the availability of high-protein wheat remains constrained. Traders are expected to struggle with sourcing enough quality wheat to meet the demands of international buyers, particularly in the second half of the season.
Drought in Brazil continues to hamper soybean planting
In South America, weather conditions continue to drive sentiment in the soybean and derivative markets with the US CBOT soybean and soybean oil futures prices rising by 3.6% and 8.4% w-o-w on Sept. 24. Drought and heat have continued to hamper soybean plantings in Brazil with overall plantings reaching 0.9% as of late last week; compared to 1.9% reached during the same period last year. Market sources have reported that plantings in Mato Grosso (top producing state) are 3 weeks behind schedule with moisture urgently needed for the soil. While the 2024/25 Brazilian soybean crop is still projected to be ample at 169 million metric tonnes (+10.5% year-on-year (y-o-y) according to the USDA. Meanwhile, the Brazilian National Supply Company (CONAB) projects a 12.8% y-o-y increase to 166.3 million metric tonnes. However, rainfall in the coming weeks would be required to mitigate further planting delays and potential yield losses. In Parana, soybean plantings reached 10% of the projected area by Sept. 24, trailing last year’s level by 16%.
In Argentina, farmer selling of soybeans reportedly slowed in the first half of September. Market sources have also noted comparatively low soybean oil stocks in the country. The EBP for Soybean Oil FOB Argentina climbed by 7% w-o-w on Sept. 24. Farmer selling, governmental policies and logistical constraints remain key watch points for the Argentinian market. According to market sources, low water levels in Parana have continued to disrupt exports; increasing logistic costs and reducing competitiveness. Expana has learnt that the Argentinian government is preparing a tender to dredge the Parana River, which would likely deepen the shipping channel, allowing for vessels to load bigger cargoes.
Analysis: Europe Vitamin A, E price outlook unclear; buyers hesitate, expect further discounts
DDP Europe vitamin A and vitamin E spot prices have stabilized after spikes in late August following BASF’s force majeure declaration. Good Q4 coverage has been reported, but the outlook for Q1 remains unclear as buyers adopt a wait-and-see approach, with some producers reluctant to quote for next year, market sources have said.
Europe-delivered vitamin A spot prices were last assessed at €65.00-69.00/kg on 26 September, stabilising after reaching more than a four-year high of €73.50/kg on 22 August following news that BASF will not restart production vitamin E, vitamin A and carotenoid production in Ludwigshafen this year.
DDP Europe vitamin E spot prices were assessed at €17.00-19.00/kg on 26 September, down from €20.25/kg in the last week of August.
Despite an expectation that BASF will not be able to offer new volumes before the end of Q1 2025, many buyers are reluctant to secure coverage for an extended period.
Hesitant buying
A reseller stated that it was fully covered for Q4 but only partially for Q1 2025, preferring to wait and observe how prices evolve. “There is a feeling [among end-users] that prices will go down after the initial spikes. It depends on [updates] from BASF … we also prefer to wait and not make wrong decisions … we are covered for Q4, staying calm and waiting for clearer situation,” said the source. The reseller added that the supply complication was more pronounced for vitamin A than for vitamin E.
A trader observed that there has been much less demand recently, with buyers anticipating that prices might drop and therefore delaying further purchases.
“Most positions have been covered globally but still pockets uncovered especially by buyers that have reacted late after BASF FM and are waiting to close last volumes when price would soften a bit. We don’t see this happening. Most regions haven’t really started to cover Q1… Coverage is not higher than 10-15% for most regions,” said one producer.
Another producer claimed not to be ready to discuss Q1 volumes and prices but acknowledged that requests to cover this period – some for volumes between 5-10 tonnes – were already coming in from buyers.
Sources previously reported that the market had quietened, although some volumes remained to be covered, even for Q4; it was suggested that the market could be “in between two storms”, with further price spikes possible in November and December.
Market sources previously said vitamin A 1000 and vitamin E 50% spot prices for delivery in Europe were unlikely to ease down before the end of Q1 2025.
European lysine market faces increased uncertainty following potential retroactive anti-dumping measures
European sellers and buyers of China-origin lysine are grappling with heightened uncertainties regarding future spot prices, following a recent statement from the European Commission (EC) about the potential retroactive implementation of anti-dumping measures.
In a statement, released on 24 September, the EC outlined the possibility of applying anti-dumping measures retroactively as part of its trade defence mechanisms. These measures pertain to “ongoing investigations where provisional determinations have not yet been made.”
Meaning, should the ongoing investigation confirm that Chinese lysine is being dumped, retroactive duties could be imposed to offset the damage caused during the investigation period. However, the retroactive imposition of such duties is not automatic and is subject to certain conditions. This decision would only be made at the definitive stage of each investigation, reads the statement.
Additional stress for the market – sources
“Big challenge for importers and their European customers! Not easy to anticipate,” said one trader.
A source from a feed additives producer said while the announcement did not provide enough concrete details, it nonetheless added pressure to an already “highly stressed” market. Another producer said the market needs to wait for more official announcements from the Commission.
A reseller acknowledged the announcement but noted that the decreasing cost of freight will be the key factor for lysine prices at present.
In May 2024, the European Commission (EC) initiated an anti-dumping investigation into Chinese lysine imports into the EU, following a complaint from METEX NOOVISTAGO (now Eurolysine), the EU’s sole lysine producer.
Impact on prices
The outcome of the ongoing anti-dumping investigation into Chinese lysine imports, potential changes in import quotas, and the forthcoming EU deforestation regulation have been identified as key factors influencing lysine prices in Europe for Q4.
While uncertainty is likely to provide some support to current spot prices, demand remains muted, and availability in Europe is sufficient.
DDP Europe lysine HCl spot prices have remained stable to slightly softer in the second half of September, with strong market coverage reported.
Sources say that demand is muted, with few inquiries. Additionally, importers are said to have stocked significant quantities of lysine in European storage facilities ahead of the anticipated reintroduction of import duties in Q4, ensuring sufficient stock levels.
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Written by Nick Wood
