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Frontrunner - 10th February 2023

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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 farm trader, Ollie Wilson. 

WHEAT

  • Markets in recovery mode

This week world wheat markets continued their February recovery, shaking off the January blues. London wheat futures reached their highest level since 6th January, following European markets higher. The euro has been weak compared to the US dollar, with a 2% drop in value from last week's ten-month high. This allows EU wheat to become more competitive and a key factor in trying to secure export sales to Algeria in its latest tender. Official EU wheat exports are now seen at 19 million tonnes, although private analysts estimate shipments at least one million tonnes ahead of that figure from an overall surplus of 30 million tonnes.

With just short of five months of the season to run and a third of the surplus remaining, France is already tight on remaining supplies. Germany, Romania and Bulgaria, however, have work to do and will be keen to secure fresh export business amidst cheap Russian offers. Last week, Russian wheat secured over half a million tonnes of sales to Egypt, undercutting French offers by $30. The vulnerability of the 'safe' Black Sea export corridor for Ukraine wheat exports again came to the forefront of the markets. A Russian official said work to unblock Russian exports under the terms of the deal were unsatisfactory and accused the European Union of failing to deliver on its promises. The deal is up for renewal in March and its longevity is in doubt.

  • No ripples on the pond from the USDA

Mid-week, the United States Department of Agriculture (USDA) updated its World Agricultural Supply and Demand Estimates (WASDE) report and delivered a set of data that provided no fresh market direction. Modest changes made in production and consumption sees world wheat ending stocks rising one million tonnes on last month. However, this is still 7.3 million tonnes down on last year. Corn world ending stocks will fall by similar, down one million tonnes on last month and down 11 million tonnes on last year.

However, there are still some details in question that have the potential to provide more notable changes and market influence. Recently, the USDA stated the Russian official wheat production estimate above 104 million tonnes is not feasible. Yesterday, the USDA increased Russia's wheat production estimate by one million tonnes on its previous estimate to a total of 92 million tonnes. Therefore, it is reasonable to assume that is its final number, despite other analysts seeing it as 100 million tonnes.

Australia edged up to 38 million tonnes from the previous estimate of 36.6 million tonnes, but recent estimates from private analysts are up to 42 million tonnes. For corn, cuts to Argentina didn't go far enough with Rosario Grain Exchange at 42.5 million tonnes - the USDA did make a cut but only to 47 million tonnes. Ukraine production was left unchanged at 27 million tonnes by the USDA, when others estimate the production down to 22 million tonnes with 10% of the crop still in the field. It is not unreasonable to suggest that world production is too optimistic by 9.5 million tonnes.

  • India battening down the hatches?

Favourable growing conditions and a small rise in the planted area leaves India expecting a record wheat crop from its harvest, which runs through March and April. However, the government is considering an extension for its wheat export ban in order to rebuild strategic stocks and ensure local supplies can be maintained. Last spring India began shipping in earnest, filling part of the gap left by Ukraine following the Russian invasion. Despite a damaging heatwave, officials maintained the country had a record crop and surplus stocks they could ship. However, they went on to find they may not have sufficient supplies to feed themselves and employed an immediate export ban. In recent weeks, India's domestic market has seen record high wheat prices and the government obliged to release wheat from strategic stocks to ensure farmers and millers have sufficient stocks ahead of the new crop availability.


BARLEY

  • Barley prices slightly increased

Barley prices inched up this week amidst modest selling interest from farmers. Short term demand was seen coming from the trade, covering short positions. Some longer term demand has started to come from feed compounders now the barley discount to wheat is over £20/t, albeit not for large quantities. The export market remains very quiet with very few bids.

  • Malting barley under pressure

Malting barley prices have come under pressure this week and have not followed firming feed wheat values. With the size of the exportable surplus and sluggish current export pace, it feels like premiums will come under further pressure. Demand uncertainty remains prevalent.

  • Risk management opportunities for crop 2023

Looking forward 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 contracts being offered. Please speak to your local farm trader for more information.


OILSEED RAPE

  • Traditional fundamentals take charge of oilseeds markets

In the last week, we have seen oilseeds markets plateau to an extent as the trade awaits some concrete numbers for soybean crops in Argentina and Brazil - the former is in early stages of development and the latter is waiting for harvest progress. This anticipation was supplemented by the USDA WASDE report released this week. The USDA reduced the Argentinian crop less than other agencies and kept Brazil's crop the same at a huge 153 million tonnes.

More specifically to rapeseed, values have regained most of what they lost after announcements from the German Federal Minister of the Environment, Steffi Lemke. She said that she would be proposing the removal of all crop-based content in biofuel but the market realised this will not be imminent, even if it comes to fruition.

A weaker sterling versus the euro was helping to strengthen UK ex farm rapeseed prices but this has reversed in the last week with increased investor confidence in the UK.

Another important factor in oilseeds markets is the current strength seen in oil meals (rapeseed meal etc.) due to a protein feedstuff shortage. For crushers, the oil share (the % of margin they are making from oil versus meal) is very low, with meal outpacing the oil in terms of margin generation. Whilst this doesn't make a huge difference to overall demand levels for rapeseed, it is interesting to note.

Oilseeds markets are keeping a keen eye on South American soybean production in combination with demand levels for oil linked to the progress of economic recovery. 


 PULSES

  • Old crop trading slows down

With growers busy looking to get on with spring land work, the volume of old crop beans traded in the past week has slowed down. Despite the lack of fresh supply and a slowly rising wheat market, bean values have remained generally unchanged and indeed in some parts of the country, there are still large volumes of beans left unsold.

With minimal fresh demand coming from the UK, the country will be reliant on European buyers coming to the UK for fresh supplies.

For the third year in a row, the Australian bean crop has come in at well over 700,000 tonnes, almost double that of four years earlier. With minimal home demand these beans are generally traded to Egypt, resulting in buyers there not requiring any UK beans.


 FERTILISER

  • AN/Urea

It's been a quiet week on urea trades with little movement on FOB values out of North Africa. With spring applications now commencing, there will likely be little appetite to import any more urea into the UK at current offers due to the timings of receiving shipments. However, stocks are available if required.

AN levels have softened in the past few weeks, yet demand remains low with many growers having ample stocks in the shed to see their first applications done. Both urea and AN markets will continue to go sideways, however, it is still worth pointing out that UK and European availability on AN remains low and any political instability in Ukraine could reverse the course of the market. Growers should also consider maximising their applications to this year's crops, given the fact that they look like they have great potential and also on the basis that forward grain values show signs of recovery.

  • Liquid fertiliser/UAN

Another significant UAN vessel arrived in the UK this week and is currently discharging at port. This gives UAN users continued security, with the certainty of supply through the spring season for a full range of nitrogen and nitrogen sulphur grades. Applications are underway in some locations, with product being applied on oilseed rape crops and winter cereals where conditions allow. Growers are encouraged to confirm any additional requirements with their Frontier contact.

Demand for nitrogen phosphate products is increased as root crop plantings are planned for the coming weeks.

  • PKs

Potash pricing remains stable, with only phosphates showing some slight weakness going forward. Sales activity has picked up a pace and delivery timings are becoming the main focus with delays of between three and eight weeks, depending on growers' product choice. Please speak to your local Frontier contact to discuss your outstanding requirements.


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. 


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