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Frontrunner - 10th November 2023

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LISTEN TO FRONTRUNNER

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. 


WHEAT

  • Markets

This week has brought more volatility across the US and European wheat markets.

On 3rd November, London International LIFFE (Financial Futures and Options Exchange) closed at £200.50/t. Since then, London futures traded in a £7.05/t range between £205.00/t and £197.95/t before closing last night at £201.05/t.

MATIF (Marché à Terme International de France) followed a similar pattern, closing at €240.00/t on 3rd November. Futures traded in a €8.25/t range between €245.00/t and €236.75/t before closing at €239.75/t last night.

Across the Atlantic, Chicago Board of Trade (CBOT) closed at $6.164 per bushel on 3rd November. It then traded in a $0.29 range between $6.082 and $6.372 before closing out last night at $6.220.

  • Trade and tenders

Argentina's wheat crop forecast has been reduced to 13.5 million tonnes, which is three million tonnes below the last United States Department of Agriculture (USDA) estimate.

Jordan has reportedly purchased 60,000 tonnes of hard wheat at $276/t for delivery in February.

Meanwhile, Algeria bought a minimum of 180,000 tonnes of wheat at $266/t, some estimate this could have in fact been up to 650,000 tonnes.

Saudi Arabia bought 710,000 tonnes of wheat split into two 355,000-tonne shipments with little detail available.

Annual EU exports are forecast to be approximately 27 million tonnes, with end stocks put at 24 million tonnes. The USDA had EU end stocks forecast significantly lower at 12 million tonnes.

Romania has led wheat exports with 2.774 million tonnes exported so far. Followed by France with 1.868 million tonnes exported.

Morocco is the main buyer of EU wheat this year, with 1.644 million tonnes imported, followed by Nigeria which took delivery of another million tonnes.

  • Black Sea

The war premium on global trade has been minimal recently, with a flow of grains coming out of the Black Sea region unhindered. However, a missile struck a ship in Odesa which added to the risk of shipping, prompting the market to rally. The ship was due to collect iron ore destined for China. The risk of more conflict and insurance premiums sent the market up which is when we saw Wednesday's highs.

  • Weather impacts

Wet conditions continue to hamper progress in Western Europe, Brazil and Argentina whilst central USA remains dry.

Australia recorded its driest October since 2002 due to El Niño but has now started to receive rainfall.

French wheat plantings were ahead of the 'average' but now the country is 10% behind. With current soil moisture levels and the wet forecast, catching up will be a challenge.

  • USDA WASDE report

It's worth mentioning that if US congress doesn't approve the annual appropriation bills by 17th November, the USDA may have to shut down until the relevant bill/s are passed. This could put a stop to the World Agricultural Supply and Demand Estimates (WASDE) report which the trade eagerly anticipates each month.

The latest USDA WASDE report was published last night. It was neutral to slightly bearish on the wheat front.

A summary of the report is as follows:

  1. There's an increase of 0.6 million tonnes in global supplies, which puts the total to 1,051.5 million tonnes.
  2. Global production has been reduced by 1.5 million tonnes to 782 million tonnes, mainly in India, Argentina, UK, Brazil and Kazakhstan.
  3. Russia has increased production by five million tonnes to 90 million tonnes.
  4. It was estimated that global consumption is marginally lower.
  5. Less trade was noted (down by 1.3 million tonnes to 205 million tonnes) mainly from reduced exports from Argentina, Egypt and India with a partial offset from increased exports from Ukraine.
  6. Larger ending stocks predicted – an increase of 0.6 million tonnes to 258.7 million tonnes which offsets reduced global production. 

BARLEY

  • UK feed barley prices continue to trade in narrow range

This week feed barley values have remained in a relatively tight range, continuing a trend that has existed for the last six weeks.

The UK remains uncompetitive on the export market with trade continuing at a slow pace. As of the 31st October, the UK had exported approximately 230,000 tonnes to the EU which compares to the 370,000 tonnes that was shipped at the same point last year.

The UK has a sizeable exportable surplus on paper but the current domestic UK market is able to absorb the volumes being sold by farmers on a weekly basis.

Feed barley is now at an approximately £20-£25/t discount to feed wheat and as a result is finding more domestic demand, particularly in the north of the country where the discount is widest and feed barley looks most attractive in terms of value.

Over the coming weeks, the market will be driven by just how much more domestic demand UK feed barley can buy from other commodities or whether farm selling increases to a point where the UK needs to find export demand in order to physically move the grain coming into market.

With the wheat market rallying at the beginning of the week, farm selling of feed barley slowed. However, as the wheat market has given back those gains in the last couple of days, we could see a return of feed barley sales.

  • Old crop malting premiums remain supported

Old crop malting barley premiums remain around £60-£70/t over feed barley which are attractive levels, especially while movement from farm to maltsters and to the port continues.

Managing the variable quality that was produced this harvest remains a challenge, certainly compared with last year. There are higher failure rates, particularly in Scotland and the south of England. Any fresh demand for malting barley is limited now until the second half of the season.

  • New crop on the radar

As mentioned in previous reports, wet weather in October has had a significant impact on winter cereal plantings. The market has paid more and more attention to these conditions, which has caused an increasing interest in new crop prices. The true extent of the winter area that hasn't been planted won't be known until the spring, once cropping plans have been finalised.

Frontier has a range of contracting options available for spring barley including pools, flat priced contracts and minimum/maximum schemes. Please get in touch with your local Frontier contact to find out more. 


OILSEED RAPE

  • Rapeseed markets trade lower again on the week

This week rapeseed markets finished lower than where they started - a common theme for this crop year. There has been limited trade recently with farmers still relatively reserved to sell at these levels.

Black Sea supply is more difficult to attain, however, processor's cover is ample until the New Year. Russia and Ukraine have been processing more of their own oilseeds and have become aggressive sellers of vegetable oils in the past month. If this continues, it will take away European crushers appetite to buy rapeseed.

  • Other oilseeds markets

The current focus for the whole oilseeds complex is the South American soybean situation. Conditions for planting in Brazil are less than ideal, with the South of the country too wet and the rest of the country too dry.

Last night's USDA WASDE report failed to give any bullish fuel to the market which led an immediate 21 cents per bushel drop in the CBOT soybean futures. 


 PULSES

  • Strong demand from domestic consumers

This week we have seen bean prices rise due to the continued strong demand from domestic feed consumers.

Other mid-range proteins have seen a significant increase in values which means they shouldn't impact the current demand for beans. However, European broad beans are still significantly cheaper than the UK. The higher UK values go, the more sense it will make to start importing beans into the country which will put a ceiling on the market. 


 FERTILISER

  • Urea/AN

November rainfall continues to keep drills parked up in many areas of the UK. Plantings seem generally ahead of autumn 2019 when conditions were similar, but some pre-storm wheats need dry weather to aid full establishment.

Nutrient demand spiked in late October prior to a slight lift in prices as we moved to November terms. There's only six delivery weeks before the Christmas break and unless demand returns quickly, a spring resembling the one in 2020 looks likely. There could be a huge amount of demand when winter crops show potential or once an alternative spring crop is in the ground.

Weather in the UK will continue to drive demand and suppliers are aware of the low levels of demand throughout Europe and further afield. Following the previous two seasons, producers are more risk averse than ever and are already reducing production rates instead of holding high stocks. Back in spring 2020, we had huge stocks in the UK to feed the demand. This is not the case now due to many suppliers and producers taking a huge hit last spring as markets tumbled.

Nitrate supplies in the UK are minimal, with very few offers from Europe. CF Fertilisers is already selling for March '24 and does not have any product available prior to that.

Urea offers are still on the high side due to currency and lower production out of Egypt, so few of the larger cargoes are being traded. Current urea stocks in the UK are low compared to autumn '23. Without demand, buying decisions are being pushed down the road which is understandable given the weather but there will be supply issues ahead.

Gas prices are slightly weaker compared to last week but still at £1.15/therm which is over double the May '23 price.

  • Liquid/UAN

Last week saw values for UAN increase for spring 2024 delivery. This increase puts UAN pricing in line with solid offerings available in the marketplace for that period.

Tank fill terms are available for those of you with capacity and wish to take advantage of pre-Christmas values.

The suspension fertiliser range is coming to close at the end of this calendar year. Growers with root crops in their rotation are likely looking for alternatives to supply required nutrition this coming spring.

A wide range of NPK solution grades are available, either for placement or broadcast application. These offer different NPK ratios to suit crop requirements whether it be for sugar beet, potatoes or cereals. Sulphur can also be added to these grades.

  • PKs

New terms for MOP, TSP and DAP mixes were released this week. We also saw an increase of around £5/t and movement terms through to January/February 2024 from some suppliers.

Demand for PKs reflects the situation in the nitrogen market but with a little more interest in covering nutrients for some crop types. There's little downside for all fertilisers, but less so on phosphates and deep mind raw materials like MOP where production rates can be curtailed if there is an oversupply.


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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