Frontrunner - 24th February 2023

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WHEAT

WHEAT

• Lower wheat prices

European wheat markets have fallen sharply this week, dropping back to price levels seen towards the end of last month. Markets had previously risen due to concerns around the Ukraine Black Sea export deal with Russia and the UN not likely to renew next month, which will be when the timeline for the previous agreement comes to an end. Recent comments from Russian officials suggested some dissatisfaction that the deal was not working in its favour. However, in a public address this week, President Putin made no comments to indicate the deal will not be renewed. Despite this, a date for renegotiation has not yet been set. Ukraine will ask Turkey and the UN for a one-year extension to the export deal and to expand it to include the ports of Mykolaiv.

• US crop set for a seven-year high

US wheat and corn futures markets have continued to find selling pressures this week, with expectations for larger 2023-24 wheat and corn crops. On Thursday, the United States Department of Agriculture (USDA) stated at the annual Outlook conference that US farmers are expected to increase their corn planted area up to 91 million acres, up from 88.6 million acres last year. However, it is also projecting record yields of 181.5 bushels per acre - a near 5% jump on the year. These are expectations and clearly helpful weather is needed to allow farmers to drill the crop and for the projected yield potential to be realised. With the area greater than the trade expected it to be, Chicago Board of Trade (CBOT) corn futures dropped to a six-week low on the data.

US farmers are also seen notably increasing their wheat area up to 49.5 million acres from 45.7 million acres last year. This is 800,000 tonnes higher that the trade expected and doesn't help wheat price recovery. However, the drought in Kansas may yet still notably impact yield potential. The USDA sees average yield at 49.2 bushels per acre, this compares to the figure of 46.5 bushels last year - a seven-year high. Again, weather is key.

• Fading export hopes

Technical hitches are preventing Brussels from updating EU weekly export data and in the absence of that, the European Commission cut its forecast for EU wheat exports to 32 million tonnes. This is down from 34 million tonnes a month ago, although it's still 9% above 2021/22 wheat exports of 29.3 million tonnes. Increasing Black Sea competition is cited as the primary reason and in the eastern EU states, the old crop stock burden is becoming an issue. This contrasts with the EU's primary wheat exporting country, France, where farmers are reported to almost be sold out. According to the European Commission, soft wheat stocks at the end of 2022/23 will rise to 17.1 million tonnes, up from 15.4 million tonnes which would be the highest carry out in at least four years.

Russia continues to dominate world wheat export market share with offers for over half a million-tonne made to Egypt, undercutting offers from other origins. Egypt confirmed it bought 240,000 tonnes of Russian milling wheat at $317.50 including freight, the sterling equivalent is £264/t. Morocco, which to date this season has been one of the primary buyers of EU wheat, indicated it may turn to cheaper Black Sea supplies for its next spell of buying.

• Argentina woes continue­­­­­

In Argentina, persistent drought is worsening crop potential and last week, the Buenos Aires Grains Exchange warned that further reductions in crop production estimates should be expected. This week in its latest report, it cut the country's corn production estimate to 41 million tonnes from its previous estimate of 44.5 million tonnes. This leaves the USDA from its World Supply and Demands Estimates (WASDE) earlier this month well above at 47 million tonnes. There are some concerns also from Brazil where persistent wet weather is delaying the second corn crop planting because of late cut soybeans. Over half the crop could be drilled beyond the optimum planting window and that could impact on yield potential. Brazil is expected to harvest a record 125 million tonnes corn crop, up from 116 million tonnes last year. However, two years ago late-drilled crops suffered frost damage that led to crop losses.

BARLEY

• Feed barley

Feed barley use in feed rations was down 30% year on year for July to December. Overall demand for animal feed was also lower, especially from pork and poultry sectors – these trends have continued since the start of 2023. A mild February has not helped stimulate fresh demand from the ruminant sector and with spring fast approaching, the market is not expecting a sudden pickup in demand before the end of the season. Barley is only approximately a £20/t discount to wheat and edging ever nearer to £200/t ex-farm in all regions.

• Slow export demand

Demand from the export market remains sluggish. The UK has only exported 690,000 of barley since the start of February against a surplus (on paper) of approximately 1.4 million tonnes. Spain, Portugal and Ireland have been the main destinations for UK feed barley exports this season, but the UK has faced stiff competition from Ukraine into the Spanish market in particular, which has been one of the main recipients of grain via the grain corridor. What happens next with the grain corridor will be key for old crop feed barley, however, current market sentiment is that it is likely to continue, with Ukraine asking for a 12-month extension rather than the four months previously.

• Malting barley

It has been a quiet week in the malting barley market with very little liquidity. Old crop malting barley still feels heavy, with a weighty surplus still to be exported and domestic maltsters well covered for the season.

Looking ahead to crop 2023, Frontier is offering a range of marketing options to help growers manage risk for their malting barley crops. Guaranteed minimum premium contracts, futures-related distilling contracts and malting barley pools are just a selection of the marketing opportunities available. Please speak to your local farm trader for more information. 

OILSEED RAPE

• Rapeseed prices reverse after strong month

In the last month, rapeseed prices have been on a resilient rise, peaking at around £480 ex-farm in England due to strong price performance in other oilseeds. This is mainly attributed to soybeans which have been firm on the back of recovering world demand post-Covid-19 combined with poor growing conditions in Argentina. This week, that price trend has reversed in rapeseed as traders come to terms with particularly heavy supply. Not helping the demand side of the equation was a slow offtake for rapeseed oil over the winter period, as inflation and the cost-of-living crisis slowed requirements from the end-product side. This demand will be hard to recover before the end of the season.

Key drivers for the old crop rapeseed price continue to be: how quickly rapeseed from Australia flows into Europe, how quickly global demand recovers and in South America, how quickly and efficiently the Brazilian harvest can be dispersed globally and finally, how badly the Argentinian crop has been affected by the drought.

For new crop rapeseed markets, there is plenty of time before global harvests come and stocks are replenished, meaning there are many variables that could determine prices in the meantime. Currently, crops look decent in Europe on a higher planted area, but drought is starting to become somewhat of a concern and moisture would be welcome soon to help crop progress.

Australia's planted area is set to be well under last year's record two million hectares due to dry conditions and preferences to plant wheat, whereas Canada is looking to grow the same area as last year. Also in the mix for new crop markets is the escalation in Russia-Ukraine tensions, which includes the aforementioned grain corridor potentially being interrupted. Ukraine has already exported the vast majority of its old crop rapeseed, so this would be a strong factor for new crop markets.

 PULSES

As wheat markets continue to rise and fall, feed bean values remain relatively steady but with limited domestic buyers. For export, it's expected values will come under further pressure soon. This is especially likely to happen after farmers have drilled their spring beans and start to sell any balances left in store. With such limited trading activity on the old crop market, there is zero demand for new crop beans so it is extremely difficult to establish where the real value is.

Peas are still trading at healthy premiums to bean values, with some feed parcels trading at £300 ex-farm and green peas suitable for micronising worth another £30-£40/t depending on location.

 FERTILISER

• Urea/AN
  

This week started with CF Fertilisers' new offer on UK ammonium nitrate. This latest offer is competitive against all European imports as it reflects the reduced and stable gas price, coupled with CF's ability to import ammonia from its US production sites. The limitation will be its production capacity for each month of offering, so do not delay a decision to purchase if product is needed for March/early April.

Due to the volatile market over the last 12 months, some importers have been sourcing nitrogen via different supply chains, so their stocks aren't as regionally balanced as they should be. With this in mind, we encourage growers to look for product that is in a bag at a known site before placing orders – if demand is for the coming month.

Urea has remained relatively unchanged over the last week. There has been some market share competition from suppliers regionally in the UK but all eyes are on India's confirmation that they require one million tonnes for March-May delivery, which will likely impact both spot and future urea offers.

• UAN
  

Applications are underway throughout the UK. Growers continue to call off deliveries from their spring 2023 contracts with the knowledge that product availability is secure. UAN remains commercially competitive in the current UK marketplace; a full range of nitrogen and nitrogen sulphur grades are available for growers with outstanding requirements for this spring season.

• PKs
  

Supplier stocks continue to remain tight and due to limited nitrogen options within certain regions, we encourage growers to look for products that are physically in a bag ready to move. As expected from last week, MOP has remained firm but unchanged, whereas TSP and DAP have weakened slightly. Although there's weakness in the market on some PKs, we advise growers to look for delivery sooner rather than later due to raw material availability on TSP/MOP/DAP if usage is needed within the next month.

Get in touch

Please speak to your local Frontier contact or email us at This email address is being protected from spambots. You need JavaScript enabled to view it. for more information or advice related to any of the topics and services mentioned in this report.