Fertiliser market update

FEED WHEAT

The market has moved dramatically lower following liquidation selling by fund managers with prices falling by £20 in one day. Approximately 50% of this fall has been recouped but the market remains nervous. Pre-Christmas demand seems to be waning as shipments of NGFI (non grain feed ingredients) arrive in the UK and EU.

Russian wheat is still being offered for export in wheat tenders although high international freight rates is making EU wheat more competitive into N African markets.

The Australian wheat crop continues to be talked lower due to lack of rain as harvest begins.

Summary

The market has seen recent liquidation selling of long positions in the US, EU and UK markets, as end-users continue to look at other alternatives to replace wheat due to the high price. We believe that demand is still to be covered in the new year, and this may support prices as stocks are estimated to decline. However, the prospects of larger wheat plantings, especially in the EU for 2008 may dampen any rally.

OILSEED RAPE

This week has been more of the same. The Australian canola crop has been revised lower again with continued dryness cutting production to 1mln/t and the world oils complex remains firm with strong demand continuing to support prices.

The EU-27 crushers are still enjoying excellent crush margins and have been keen buyers of seed post Christmas, but the pre-Christmas market is becoming increasingly difficult to sell and for those who need to move rapeseed, we would suggest that today's values are a sell.

MALTING BARLEY

The old crop market feels a bit easier this week with buyers now well covered into the new year. They undoubtedly have more barley to buy February onwards but don't leave it too late if you need movement.

Maltsters are reporting it more difficult to sell their malt at these levels as the world brewers are gradually sorting their short position out. Premiums for new crop are at record levels and this has brought forward good volumes of buyback tonnages in the last 10 days.