Frontrunner - 3rd March 2023

WHEAT

• Markets slide to multi-month lows

A strong Russian presence in the global wheat export market and a firm assumption that the Black Sea export corridor agreement will be renewed later this month have caused US wheat futures to slip to their lowest level for 17 months this week.

A spell of strength for the Euro has compounded losses for EU markets. This was highlighted by a significant purchase by Turkey of 790,000 tonnes of milling wheat, which is reportedly all from Black Sea origin and primarily from Russia. EU wheat exports have officially risen to 20.472 million tonnes, which is up 7% on last year. This leaves approximately a third of the surplus to ship with a third of the season left to run.

French free market supplies are reportedly tight, but old crop wheat from eastern countries within the EU is plentiful and becoming a burden. With speculative funds holding a significant short position in US wheat futures, questions over the Black Sea export corridor agreement triggered short covering and a rally from the mid-week lows. A Russian official has said Russia would only agree to extending the deal if the interests of its own agricultural commerce were taken into account. Criticism was made of Western sanctions preventing the free flow of Russian fertiliser exports.

• Falling estimates for 2023-24 world wheat supplies

Next season could see wheat production from some of the major wheat producers and exporters drop notably.

Analyst group SovEcon has cut its Russian wheat production estimate from 86 million tonnes to 85.3 million tonnes while official 2022 estimates were over 104 million tonnes. Analysts also see Ukrainian wheat production falling from 22 million tonnes this season to 15 million tonnes or less next season due to the impact of the Russia-Ukraine war.

Australian production is similarly in question with production estimates as low as 25 million tonnes, which would be a significant drop on the record 38 million tonnes that were produced this season. The developing El Niño weather pattern could leave Australia dryer than usual in the second half of the year, which could lead to lower yields.

The Indian government's claim that it will achieve a record 112-million-tonne crop is in question as the country saw potentially damaging record temperatures last month and more excessive heat is expected through to May. Local analysts predict that the production total will be less than 100 million tonnes.

Production estimates for Canada and the EU are not anticipated to change as the drilled area is as expected and parts of the EU have seen a record-breaking dry winter. Furthermore, the US has the potential to boost supplies with a winter drilled area that is up 11% on the year.

Recent estimates from the United States Department of Agriculture (USDA) sees 2023 US wheat production at 51.5 million tonnes, which is up 6.5 million tonnes on the year. However, the quality of crops in the primary winter wheat producing state Kansas has dropped on last month, with just 19% of the area rated 'good/excellent' compared to 38% this time last year.

BARLEY

• Old crop feed barley values drift lower

With pressure on wheat markets at the start of the week, UK old crop feed barley values fell on a continued lack of domestic and export demand. UK exports stand at approximately 750,000 to 800,000 tonnes at the end of February, leaving the UK with a surplus still to market. With domestic demand lagging and a sizeable surplus on paper still to export, old crop barley values could well continue their trend lower with values now below £200/t ex-farm in several areas.

For old crop malting barley, farmers are continuing to market balances as they become available. With pressure in the last week on the feed base, premiums have widened slightly to create a good selling opportunity with little prospect of higher physical prices as buyers are around 95% covered until new crop.

In other news, the Agriculture and Horticulture Development Board (AHDB) has published its latest animal feed production data from July 2022 to January 2023, which showed total feed production down 6% on the year with the main decreases seen in the monogastric pig and poultry sectors. Of greater significance, particularly for the barley market, is that barley usage in rations is down 20% on the year. This serves to highlight the fact that barley has not been competitive enough in feed rations compared to wheat and maize.

• Spring plantings well underway in England

Spring plantings of barley are well underway throughout England with a relatively dry February giving farmers an opportunity to plant earlier than average into good seedbeds. Many areas have seen some light rainfall, which isn't halting any planting progress, and there are some additional showers forecast over the next seven days. Drilling in Scotland is unlikely to begin until the middle of March at the earliest. Similarly, French plantings are well ahead of last year and now close to completion.

As malting barley is planted, farmers are committing grain on pools and min/max schemes, which are a two-step process to pricing malting barley. For any queries about contracts available for spring barley, please contact your local Frontier contact. 

OILSEED RAPE

• Rapeseed prices decline

Ex-farm rapeseed prices in the UK have dropped around £10/t on the week as other oilseeds values also fall. Soybeans have seen particularly weak prices as increased progress in the Brazilian harvest has made some export supply available, particularly for China, which is Brazil's main export market.

Soybeans also saw some downside on the back of fund and other non-agricultural activity within the market where parties were holding record long positions in the contract. As they decided to exit these positions by selling, we saw the market plummet; particularly on 28^th February. If soybeans continue to decline in price, meaning they offer less competitive support to rapeseed, the rapeseed trade will become more focused on physical supply and demand. For rapeseed, this continues to get heavier on the supply side with widespread carryovers expected into the 2023 crop year.

Next Wednesday will see the release of a new USDA report, which will provide updates on the situation in South America. South American weather will also be a key focus for the market.

 FERTILISER

• Urea/AN

CF Fertilisers announced mid-week that its current offer for Nitram will be withdrawn on Thursday 2^nd March. At the time of writing, its next move is unknown, but we expect the prices to rise as March tonnage is sold and imports of alternative nitrogen products struggle to compete in the UK. Logistics will also play a major role in pricing as the time for peak demand approaches.

India is still expected to procure around one million tonnes of urea in its latest tender due this week. Other demand for urea remains weak and, even with some requirement from India, the market anticipates little demand as farms remain adequately stocked for now.

Ammonia prices dropped again this week. Despite the expectation of a short-term cold spell, gas prices remain below the levels seen in May 2022, which adds further pressure to the downside in the mid-term.

• UAN

At the end of last month, the largest UAN vessel to ever arrive in the UK docked in the northeast. Product from this vessel will also be shipped into portside storage in East Anglia. This arrival, combined with other shipments in 2023 to date, provides security of supply and availability of product for growers who, in favourable conditions this week, continued applications of UAN across the UK. Those with outstanding deliveries can be assured of prompt turnaround and access to a full portfolio of grades this spring.

• PKs

Currently, the main issue facing PKs is supply. Blenders have been buying hand-to-mouth for months as low demand at present combined with the demand destruction seen from September 2022 to January 2023 has led to a stock shortfall. Falling international prices, mainly on phosphates, has also slowed imports of DAP/TSP, which means there has been a slight increase in sales. This will put major pressure into the farm deliveries. Please continue to speak to your Frontier contact for updates on supply and market conditions.

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.