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Frontrunner - 11th January 2024

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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

  • Wheat prices continue to fall

This week world wheat markets have continued the new year in decent shape, as Russia continues to dominate wheat export share by under cutting other origins.

Paris wheat futures fell to new contract lows under the weight of old crop wheat supplies, despite concerns for 2024 production potential. In its latest tender to buy wheat, the General Authority For Supply Commodities (GASC) purchased 420,000 tonnes of Russian wheat for delivery through February and March at the Russian floor price of $265 FOB. There was just one French offer which, including freight, was about $17/t too expensive to compete with the Russian sales, highlighting the competitive challenges in world trade.

Brussels updated three weeks of missing EU wheat export data and added 1.85 million tonnes, taking the total shipped for the season to 8th January to 15.836 million tonnes compared to 17.57 million tonnes last season.

The United States Department of Agriculture (USDA) estimates the EU will ship 37.79 million tonnes this season but it looks unlikely anything more than 32 million tonnes could be achieved. Friday will see the first World Agriculture Supply and Demands Estimates (WASDE) report and these USDA estimates could mean a potentially bearish adjustment.

EU wheat imports jumped 772,000 tonnes to 4.959 million tonnes for the season which adds another bearish element to the market, particularly if that pace of 250,000 tonnes per week is maintained. A sharp injection of demand is needed to reinvigorate EU wheat markets.

  • UK prices also lower

UK wheat prices have followed other markets down, but old crop values remain significantly above competitive export values.

Domestic feed wheat prices are about £13/t too high to compete for export trade, meanwhile imports do feature into deficit areas in the North.

Ex-farm sales so far this season have not been heavy enough to force prices to export levels which has historically been the case. This is largely due to uncertainty over 2024 production potential. Persistent rain through to the end of 2023 and the beginning of this year limited winter wheat planting and the crop may not be sufficient to meet domestic demand.

New crop prices are at a premium to encourage a big carryout and with only a few dry days experienced drills are already out on lighter land to plant wheat. This could start to change the supply dynamics.

Meanwhile, Group 1 bread wheat premiums maintain their historically high levels - ranging between £60-£70/t depending on geography. With plenty of old crop cover yet to take, miller needs look likely to keep premiums high for some time to come.

  • US wheat potentially in good shape

US winter wheat prospects are encouraging and are adding pressure on Chicago Board of Trade (CBOT) prices.

Kansas is the number one winter wheat producing US state and crop condition is seen up to 43% rated 'good/excellent' as of 31st December. That is up seven points since the end of November and compares to just 19% last year.

Oklahoma is even better – up 14 points since the end November to 67% rated 'good/excellent' which compares to 38% last year. Texas has also improved by three points to 49% rated 'good/excellent'.

Friday's WASDE report will include an overall update to US wheat stocks and the US winter wheat planted area. There are various opinions on how this might compare with last year which leaves scope for uncertainty and subsequent price volatility


BARLEY

  • Old crop feed barley prices drift lower

Little has changed week on week in feed barley markets, with prices down £1-£2/t on old crop.

Farmers are coming back from the festive break and there is a reasonable volume of farm selling at anywhere between £150-£165/t ex-farm depending on locations, with the higher prices being seen in the North of England.

We have seen a small volume of exports trading on the week to Ireland which is good news and could suggest that a short-term bottom has been reached on old crop feed barley.

As mentioned in previous reports, the export pace this crop year has been much slower than what we would usually see and the requirement to become export competitive to mainland Europe will depend on the volume of barley that comes to the market in the coming months.

  • New crop barley discounts to wheat looking attractive for compounders

Farm selling is much slower on new crop given the winter barley area is lower for crop '24 and the spring barley crop is yet to be planted.

Compounders are starting to look at new crop positions - feed barley discounts to feed wheat have been trading between £22-25/t in the past few days. This discount is wider than we would usually expect for this time of year and given that the UK has not planted two-thirds of the 2024 barley crop, values are likely to move in line with wheat futures at this stage of the season.

  • Old crop premiums still historically high

Old crop malting barley premiums continue to trade at historically strong levels despite that, on paper, the UK still has a sizable exportable surplus of malting barley still to trade.

With premiums so large it could be wise to market any old crop balances as it's not worth the risk of keeping it in store, especially at significant premiums to new crop.

The market is expecting an increase in the spring barley area in the UK and Europe. However, with competition from other crops such as corn and sunflower seed in Europe, as well as the attractiveness of the Sustainable Farming Incentive (SFI) schemes in the UK, the increase may not be as large as previously thought. As of today, estimates are around a 5-20% gain but we would edge closer to 5%.

If there is an oversupply of malting barley, growing a mainstream variety such as Laureate or Planet could offer the best possible market access. Other varieties can be considered but look for a guaranteed premium contract for these because if given without one in a year of surplus, premiums could be difficult to achieve. 


OILSEED RAPE

  • Oilseed rape values trading at similar levels to last weeks close

MATIF traded to a low as the market struggles to find sellers, both domestic and European growers remain disengaged at current levels and prices are below most growers' cost of production.

This low level of activity is set to continue, as little changes to global oilseed supplies have been reported in today's report from Brazil's National Supply Company (CONAB). Its official estimates put Brazil's old crop soybean production at 154.6 million tonnes versus the USDA's estimates of 160 million tonnes. The USDA has increased its old crop figures on the last two WASDE reports and the market is not expecting any bullish surprises.

New crop CONAB soybean figures are at 156.3 million tonnes which compares to December's figure of 160.2. This is a 3% reduction but has caused little market reaction as it aligns with expectations.

South American weather and production concerns are not having a major impact on values, but this could change with Friday's USDA report. Its average estimates have put the crop at a range between 151 and 161 million tonnes, anything either side has the potential to cause some market movement.


 PULSES

After the early new year surge in activity seen last week, there has been reduced activity from both growers and consumers this week. Values have held firm and remain unchanged.

Rapeseed meal continues to fall in price and becomes more price competitive week on week. This will have an impact on demand for beans, especially as we head into the summer. The scale of this is not clear yet as the message from feed compounders is that they still plan to have beans in their rations.

Red Sea shipping challenges have caused Australian bean values to surge and this offers the potential opportunity for UK growers to sell any human consumption beans they have left. However, at only a $5/t premium, they would have to be exceptional quality to interest potential buyers.


 FERTILISER

  • Urea/AN

In the latest tender offer, India initially looked set to cover between one to 1.6 million tonnes from a volume of around 2.7 million tonnes. However, recent reports are stating the tonnage could come in just under one million tonnes.

North African producers have kept clear this time round, but it's thought we've found the bottom of the market. Weather permitting, spring applications could be days away so it's worthwhile ordering now to ensure a delivery in time for usage.

Latest sales have increased by $34 on Egyptian FOB values. The latest February offer is $375 so on-farm values look likely to increase in the coming weeks as a result.

The rules around including a urease inhibitor in urea applications are due to commence from 1st April which also adds greater urgency for those still to buy. Frontier has treated urea options available for applications after 1st April.

UK-produced AN terms are price on application and there has been little interest since the turn of the new year. As requirements are still vastly unknown, the marketplace remains subdued which means imported AN values have stayed the same from late 2023 into 2024.

At present, gas prices are back to levels last seen in August/September 2023. They're currently below 80p/therm and it's believed that Europe has enough storage capacity to see through the spring period. However, several plants across Europe have curtailed or completely stopped production, therefore availability of AN will remain limited.

  • Liquid

Without sufficient trade post-Christmas, the UAN market lacks firm direction. However, the latest Egyptian urea trades may influence the current plateau in UK values.

At the earliest opportunity, you should review your spring requirements based on revised cropping. A full portfolio of grades is available whilst suppliers remain well stocked of raw materials across their portside locations.

  • PKs

Phosphates and potash remain relatively stable at present, although we have seen a slight uptick on DAP values from pre-Christmas levels offered.

With demand at the farm gate still slow, suppliers will be keeping stocks at sensible levels. With increases in freight rates (a result of concerned ship owners taking alternative and/or longer shipping routes to avoid passing through the Red Sea), it's important to discuss outstanding requirements on PKs to ensure timeliness of arrival.

It's worth mentioning polysulphate as an option if you're yet to buy your required sulphur when decoupling from nitrogen. Straight polysulphate or blended PKs made with polysulphate or Potash Plus are available.


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.

To be notified each time this report is published in the future, you can also subscribe at www.frontierag.co.uk/blog/subscribe to ensure you always have the latest market insights.


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