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Frontrunner - 13th May 2022



Frontrunner is also available as a podcast, so you can hear the latest from our traders while you're on the go. Listen below or subscribe to the report on Acast, Spotify, Apple Podcasts and Google Podcasts. The report this week is read by marketing assistant, Becca Russell. 


  • USDA triggers another price rally

The United States Department of Agriculture (USDA) published its May World Agricultural Supply and Demand Estimates (WASDE) report this week along with its eagerly awaited first look at the 2022-23 season. The report contained lower than expected production for US winter wheat and corn. Additionally, it outlined lower than expected world wheat stocks which sent markets sharply higher again. European wheat futures rallied again and set new contract highs.

Due to the prolonged drought and the worst crop condition index since 1989, estimates for hard red winter wheat production have fallen to 590 million bushels. This is well below the April estimate of 749 billion bushels and trade expectations of 685 million bushels.

US corn yields were expected to match those set in the USDA February Outlook Forum. This was outlined as 181 bushels per acre, but in the latest WASDE report, they were cut to 177 bushels per acre because cold wet weather is delaying planting.

2022-23 world wheat production is seen falling 4.5 million tonnes on the year to a total of 774.83 million tonnes. However, behind that headline number are some notable changes for individual producers. Ukraine is estimated to be down 11.5 million tonnes, Argentina down two million tonnes, Australia down six million tonnes, the EU down two million tonnes and China down two million tonnes. These reductions in production estimates are offset by increases for the US production estimate which is up 2.2 million tonnes, as well as for Canada which is up 11 million tonnes and additionally Russia, up by five million tonnes. Yearend stocks are seen falling by 12.7 million tonnes on the year to a total of 267.02 million tonnes which would be the lowest for six years.

It is estimated that 2022-23 world corn production will be more than 35 million tonnes lower than this season. This is due to the anticipated significant reduction in Ukrainian production, which is down 22.6 million tonnes on the year to a total of 19.5 million tonnes. With a smaller drilled area, the US is seen down 17 million tonnes which is offset by expected increases for Brazil, which is seen as up by 10 million tonnes to a record total of 126 million tonnes. Consumption is estimated to fall by 15 million tonnes. This leaves world end stocks four million tonnes lower at total of 305.13 million tonnes.

  • Moves to export Ukrainian grain

Yesterday, the European Commission said it would work with EU governments to help Ukraine export millions of tonnes of grain stuck in the country due to the Russian navy blocking ports. 90% of Ukrainian grain exports rely on Black Sea ports for export in a normal year. According to the European Commissioner for Transport, 20 million tonnes of grain need to leave Ukraine in the next three months by using EU infrastructure, but it is yet to be seen whether it is possible to realise this aim. The Canadian prime minister, who visited Ukraine, said his country would help work out options on how to export stored grain to uphold global food security.

Ukrainian farmers have now sown 8.7 million hectares of spring crops; this is 22% less than this time last year. There's an aim to reach 11.45 million hectares which would be three to four million hectares less than last season. The USDA 2022 Ukrainian wheat production estimate of 21.5 million tonnes looks low, with most of the Ukrainian wheat crop having been winter drilled and in the ground before the invasion. This compares to 2021 Ukrainian wheat production when it achieved a record figure of 33 million tonnes. The USDA sees Ukrainian 2022 production of corn reaching only 19.5 million tonnes, which is much lower than the record 42 million tonnes achieved in 2021-22.

  • Mixed views on primary wheat producers

The USDA and local analysts have a difference of opinion for 2022 Russian wheat production. The USDA estimates that Russia will produce 80 million tonnes of wheat and export 39 million tonnes while recent estimates from private analysts see a higher figure of 87 million tonnes for production and 41 million tonnes for export.

Yesterday, Putin said Russia would enjoy a good harvest and produce 87 million tonnes of wheat and increase its exports. The USDA foresees China's wheat production for 2022-23 just 1.95 million tonnes down on last year. This is unusual as the government has previously said its winter crop was in the worst condition ever with a third not drilled due to wet weather.


  • Tail end 2021/22 season demand for barley

There has been little activity this week, farmers seem to only have limited supplies of this season's crop left. The surge in wheat prices over the last seven days has widened the barley discount to wheat. Two weeks ago, it was around 0-£5/t. Today, it is around 18-£30/t therefore barley has made its way back into some feed compounders' rations.

  • Surge in new crop wheat prices draws barley with it

The unprecedented rise in wheat values this week has seen barley values rise at the same rate. In the last couple of weeks, the wheat price has been the major influence on barley price. The factors effecting the wheat price continue to be the Russian/Ukraine conflict, the ongoing dry weather in US and rising concerns of dry conditions in western Europe, along with yesterday's USDA report showing lower ending wheat stocks.


  • Biofuel mandate changes weigh in

In the last few weeks, biofuel mandates have been a hot topic in the EU as governments play with the idea of reducing the amount of vegetable oil inclusion in fuels. Governments are doing this with the view to reduce the price of fuel amidst the "cost of living crisis" being faced globally. At the time of writing, Croatia, Finland, the Czech Republic and Latvia have made adjustments to their mandates while some of the larger countries including Germany, Hungary and Sweden are debating their own amendments. This is important for rapeseed values because approximately 50% of EU rapeseed will end up in biofuel. Therefore, any changes to biofuel demand will have a large effect on the whole demand picture.

  • Global rapeseed crop prospects currently sub-optimal

Currently, production of rapeseed crops across the world are sub-optimal - in a year where a big rebound in supply would've been welcome. The top rapeseed producing country, Canada, is now into its planting season which got off to an extremely slow start with too much rain in many parts. Europe hasn't seen adequate rainfall up until this point, meaning it's unlikely the crop will develop to its full potential. However, if we were to receive good rains in the next few weeks, this would undoubtedly improve prospects in Europe and the UK. In the UK, rapeseed crops look good, potentially with some bias towards the northern half of the country where there has been more rain. On a more positive note, Australia helped compensate for a poor Canadian crop last year with a crop of around 5.5 million tonnes and is off to a good start this year with ample soil moisture for planting. The weather will naturally play a vital part in the ultimate output between now and harvest and the markets will closely follow the weather patterns in all ­­­­the major growing areas.


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