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Frontrunner - 13th October 2023

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WHEAT

  • Wheat futures sink again

Wheat futures markets came under pressure again this week, extending recent losses under the weight of fresh export sales from Russia.

In private deals it's thought the General Authority for Supply Commodities (GASC) bought 480,000 tonnes of wheat for delivery throughout November and December. Sales prices are reported to be around £265 FOB (excluding freight), but with 270 days extended payment terms. The net sales value after interest charges are nearer to $245 FOB and are significantly below the Russian Government's supposed wheat exports sales floor price of $270.

Despite UK wheat futures dropping to new contract lows mid-week, prices remain around £10/t over values to secure feed wheat export opportunities. Meanwhile, Ukraine has attracted an increasing number of vessels to use its own safe Black Sea export corridor and looks set to add to its wheat shipments into the EU. Ukraine has so far sent over 1.4 million tonnes to the EU, whilst the UK stumbled to 120,000 tonnes with most of those sales being made well before harvest.

  • USDA WASDE report

Late on Thursday, the United States Department of Agriculture (USDA) delivered a mildly market-friendly World Agricultural Supply Demands Estimate (WASDE). Wheat production was lowered by 1.5 million tonnes for Australia, 500,000 tonnes for Brazil and two million tonnes for Kazakhstan. This was offset by an increase of two million tonnes for the US, as previously flagged at the end of last month. Overall, world output has fallen by four million tonnes to 783.43 million tonnes, but demand is also three million tonnes lower, leaving world end stocks 500,000 tonnes down on the month and now 9.4 million tonnes down on the year.

The world corn balance sheet was also reduced because of a cut for the US yield - down from 173.8 to 173 bushels per acre. This cuts the US crop by 2.2 million tonnes to 396.91 million tonnes. The planted and harvested areas were left unchanged. World year-end corn stocks are predicted to fall by 1.3 million tonnes on last month to 338.22 million tonnes, but this is still up 11.5 million tonnes on the year. The USDA ignored recent cuts made to Brazilian corn output by national supply company CONAB, maintaining 129 million tonnes in comparison to CONAB's 119.4 million tonnes.

Futures prices climbed modestly into the green from pre-report losses. 


BARLEY

  • Feed barley market drops on thin volumes

In a market lacking buyers and with a lack of export interest at decent volumes, prices have been pushed lower for growers who need to sell for cash or to make space. Values have dropped £5/t this week, even though the traded volume has been low. The discount to wheat has also widened and is around £15 - £16/t.

  • UK ministry put barley crop at 7 million tonnes

The Department for Environment, Food and Rural Affairs (DEFRA) and the Scottish Government published production figures yesterday which, when added to our own estimates for Northern Ireland and Wales, predict a UK barley crop of around seven million tonnes. This leaves an exportable surplus of nearly 1.3 million tonnes.

Up until the end of August the UK had exported around 180,000 tonnes of barley, with at best another 80,000 tonnes exported by the end of September. This means that the UK will have exported only 20% of its potential surplus in the first quarter of the marketing year - a relatively slow start if these figures prove accurate.

  • Malting premiums remain high

In Europe, very little is happening in the world of malting barley. Values remain unchanged, the feed base has dropped a small amount and therefore the premium over feed remains relatively wide at £65 - £75/t, depending on nitrogen content, variety and location.

We are seeing some germination issues in the south of England, which in the absence of domestic brewing grade interest keeps a bid out there to replace previous supplies in what is generally a very quiet market.

The wider malting trade world awaits the Australian and Argentinean harvests, which need to go according to plan in order to meet commentators' expectations of world supply and demand. Demand is one of the more difficult things to assess depending on how much it has been affected by consumers having less money to spend on non-essentials.


OILSEED RAPE

  • Prevailing support has dropped out of the rapeseed market.

The crude oil markets were initially assisting rapeseed prices but have since suffered the biggest daily loss in a year due to weak economic prospects and demand data, which subsequently spurred a selloff in oilseeds and their end products.

Following this, we saw increased tensions in the Middle East which have so far added small gains back to crude oil prices, but not enough to help biofuel producers afford to pay more for their rapeseed oil. This situation is clearly volatile and will continue to impact markets for the foreseeable future.

In physical oilseeds fundamentals, European crusher cover remains strong with a lack of demand for nearby rapeseed which is providing a large incentive for growers to sell later in the season.

Freshly harvested Australian rapeseed will start to get offered in some volume again as soon as the country's harvest starts. This year its supply will have to find more homes away from Europe due to heavy domestic supplies.

Brazil is attempting to plant a record area of soybeans, although this is weather permitting and conditions there are currently dry and not helping progress. 

In the WASDE, soybean figures were of particular interest as previous reports had published numbers that were largely within expectations. Fortunately, this report did provide something for the market to get excited about as the USDA trimmed world ending stocks of soybeans for the 2023/2024 season to 115.62 million tonnes, down from the 119.25 million tonnes quoted in the September report. It also slashed US soybean production to 4.104 billion bushels from 4.146 billion bushels. This news spurred the CBOT soybean futures market to gains of 37 cents per bushel close out the trading session. The market will watch for confirmation of these numbers as the harvest completes.


 PULSES

  • Beans

Bean values are unchanged this week and are holding firm, despite the fall in wheat values. The main market support has come from merchants who are short on their commitments, but with no significant change in domestic demand this support will likely disappear in the near future and values are expected to fall. Growers thinking of selling should take advantage of this before we see a potential lull in the medium term. The window of opportunity for human consumption premiums should remain uninterrupted until the new year.

Looking beyond the short term, we do expect an increase in domestic demand due to fundamental factors that will create new and potentially permanent demand for faba beans. Consumers are actively looking for replacements for soyabeans in their feed recipes and faba beans are the best option due to their reduced environmental impact and similar nutritional value.

  • Peas

Despite some challenging conditions this harvest we have seen great quality peas with low moisture, bleaching and admix. From samples we have received, averages are at 15.4%, 9%, and 0.8% respectively. This is having an impact on feed prices with values rising this week, and although we have a large percentage of the crop making a grade above feed, values for micronising and human consumption have held firm due to average lower yields. Frontier is a keen buyer of feed peas and can offer competitive prices. Please contact your local farm trader for more information. 


 FERTILISER

  • AN/Urea

As drilling continues around the country in most areas, the UK market is looking for a catalyst to kick-start growers purchasing fertiliser again.

The escalating tensions in Israel and Gaza mean those responsible for shipments in the region are being urged to be vigilant, which will no doubt reduce exports from the country.

Israel itself isn't a big player in the UK market but it does supply a lot of fertiliser globally. Any prospect of exports being limited due to the hostilities could impact prices. The Israeli Government has asked for gas fields to be shut down as a matter of caution and this could affect supplies of gas into Egypt, of which the UK has been a big importer of Egyptian granular urea.

There are also strikes in the liquefied natural gas (LNG) sector in Australia, which again restricts the amount of global gas available to produce fertiliser, amongst other commodities. As well as this, there has been damage to a gas pipeline in Finland which supplies Europe and the UK - the cause of which is yet unknown.

There are many 'watchers' in this current market as lots of global events are unfolding. The UK will keep a close eye to see how these situations play out in the next few weeks and how they might impact supply and prices going forward.

In terms of global urea business, things have been subdued over the last couple of weeks as we await for news of the next Indian tender. This is expected around 20th October, though it is not a firm date and we could see it pushed back.

The annual Argus Fertiliser Europe Conference will be hosted next week, which should give some indication of the direction in the market.

There is still volatility in the gas and ammonia markets, and oil prices have risen over the last few weeks. The outlook for nitrogen pricing is looking firm going forward and the prospect of tighter supply and higher prices may just be the catalyst the market is looking for.

  • Liquid

The volatility throughout the energy markets is a watch for all suppliers in the UK, including UAN suppliers, who will be mindful of how any disruption to supply chains will influence the pricing offered into the marketplace.

Confirmed base requirements are being applied through suspensions across stubbles ahead of planned sugar beet crops down the East Coast of England.

Those with confirmed requirements for nitrogen and sulphur in addition to their tank fill volumes still have access to initial spring offers, which remain competitive against solid offerings.

Growers with P&K requirements for spring application on root crops or cereals have the opportunity to explore the expanded MultiFlo product range from Omex. Our FACTS qualified advisors are available to discuss how these products could be part of an overall crop nutrition programme.

  • PKs/Straights

There's very little activity in the PK market but it's likely to remain firm for the foreseeable future. Factories have been mothballed in Europe and others are having production problems which has led to a tight supply, especially of phosphate.

There are very few cargoes committed to arrive in the UK and if a cargo of TSP was to be purchased today, it likely wouldn't arrive in the UK until December. Ammonia price increases also have impacts on DAP production costs.

There's nervousness in the current market, with suppliers not wanting to over commit with little farmgate interest.

Israel is a large supplier of potash and phosphate across the globe. The country is the third biggest player in the potash market specifically - just behind Russia and Belarus which the UK has sanctions against. This leaves only Canada and Germany to supply product to the UK. There has been a port closure very near to Gaza which will affect exports of nitrogen, phosphate and potash.

We could see supply tighten up further on the back of the aforementioned conflict. This is something to be mindful of with regards to PKs, as well as nitrogen.


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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