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Frontrunner - 25th May 2018

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WHEAT 

  • Markets higher

World wheat markets have propelled higher this week, fuelled in the most part by weather driven sentiment and political positioning over tariff negotiations between China and the US concerning the supply of agricultural products.

  • Warm weather persists

Whilst US winter wheat crops remain under stress and planting conditions in Australia continue to be far from optimal, emphasis will focus on the cheapest origins of world supply – namely Black Sea wheat. As warm, dry conditions continue to set in, this region has more recently come under the spot light with crop conditions less-than-ideal.

  • Domestic

Domestic markets have been led along with the trend but the parochial situation of a lack of available spot farm grain fails to quench demand for feed and milling wheat. Delivered prices have firmed significantly during the week, but caution must be taken as we are now entering the last few months of business and consumers will not want to pay over the odds any longer than they have too.


BARLEY

  • Old crop feed barley values stagnate

As old crop feed barley demand gets filled prices have levelled out for now. Tonnage is offered into the market on most days but bids are now harder to find in some parts of the country. With an old crop premium well above new crop values, no one wants to be left with old crop supplies at the end of the season.

  • New crop feed barley values increase further

Barley values have increased this week across the UK as they follow wheat prices upward. We have seen continued compounder interest as livestock producers look to take winter cover against the backdrop of rising cereal prices. Feed barley trades have been at a sensible discount to feed wheat, although the discount is smaller than we have seen pre-harvest for the last couple of seasons. As winter barley enters the flowering stage across the country, growers should certainly look at marketing at least a proportion of their crop at current levels if they have not already done so.

  • Spring barley benefiting from recent rains

At the time of writing, beneficial rains are being seen across much of England. These have been welcomed, particularly by growers of spring barley where crops that were sown later than normal need ideal conditions to fulfil their full potential. Rain now should help with final yield, however the late drilling scenario still leaves some questions over final spring barley quality in the UK.


OILSEED RAPE

  • Heavy old crop stocks

May has been a positive month for domestic markets, with old crop firming by £10/tonne and new crop showing gains of £15/tonne –£6/tonne of which has been achieved this week. The old crop market has been held back by high European stock levels, with new crop prices now encouraging long holders to carry into the new season. European demand from rape crushers, who jointly account for 40% of the world market, has been weak recently and it is only the strength in forward markets that has prevented a slide in old crop values.

  • Firming new crop markets

In the wider market, there have been a number of factors that have lent support to the oilseeds complex. An easing of tensions in the tariff war between the US and China has created confidence that US soybean exports will hold up. Dry weather remains a concern in Canada and Australia, the Argentine soybean crop is now pegged at 36 million tonnes (down from 39 million tonnes in the last USDA report) and yield prospects on European crops have been scaled back given the late, cold spring. This week MARS, the EU's satellite-based crop monitoring service, has reduced oilseed rape yields for the 2018 crop from 3.33 tonnes/ha to 3.19 tonnes/ha.

  • Currencies

There has been little change in the sterling/euro exchange rate this month but in the last five weeks the euro has weakened by 6% against the US dollar. Given that oil around the world is predominantly traded in dollars, this has provided additional support to European oilseed markets.


 PULSES

  • New crop values

The focus in the pulse market this week has been on new crop values. With the hike up in wheat values, beans have also risen but in very limited volumes due to uncertainty over the growing crop. Rain in the Midlands and South will certainly have helped but, with spring beans still only at 20 centimetres above ground there is a long way to go before we can be confident of yield predictions.

  • Mixed conditions for EU

Elsewhere in Europe, growing conditions have been very variable. In northern France, rain and warm weather have been helpful but in the Northern Baltic states warmer temperatures are pressuring crops. In Southern Scandinavia, we have seen the temperature over 29⁰C, badly affecting the growing crop.

Further changes in market values will continue to be driven by weather conditions in Europe and Australia.


 FERTILISER

  • Awaiting CF Fertiliser decision

Most of the fertiliser trade is anticipating when CF Fertilisers will decide to restart the UK nitrogen market. However, recent global factors are leading many commentators to predict a later start than last year. Granular urea values have traded at higher levels in the past 10-14 days in most major producing countries (USA, North Africa etc.) and as a result many UK importers withdrew terms last week and are only cautiously offering new tonnes at well above previous levels.

In Europe, the nitrate market started in France with a €10 rise over the start of last year and this week Germany followed suit with a new season price for calcium ammonium nitrate (CAN). Currency is the other big factor in pricing fertiliser. Weak sterling versus both the euro and the dollar means import prices will need to be higher in sterling to achieve the same return as they would achieve for the manufacturers in markets closer to home.

This coupled with a relatively buoyant grassland market all points to a restart date somewhere in June. Prices may well be higher than people were predicting only a couple of weeks ago.

For the this year's crop, close attention to final nitrogen applications and foliar nitrogen on both oilseed rape and wheat should be considered where yield potential is high and/or quality milling markets are being targeted.

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