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Frontrunner - 16th October 2020

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WHEAT

  • World wheat prices soar

There has been little fresh news for markets this week, although on Thursday world futures markets posted significant rallies with many hitting new contract highs. Speculative funds were again assertive buyers of Chicago Board of Trade (CBOT) wheat and corn contracts as they continue to build significant long positions. Their stake in the markets is similar to those they held back in 2010 and 2012 when adverse weather severely cut wheat and corn output for many of the world's primary producers.

Last week, in its October World Agricultural Supply and Demand Estimates (WASDE) report, the United States Department of Agriculture (USDA) increased its world production estimate to 773 million tonnes this season, which would be almost 115 million tonnes more than was produced in the 2012/13 season. World wheat stocks are also set to increase by 22 million tonnes on last year.

However, dry soils in Russia continue to be a concern. There does not appear to be sufficient rain in the forecast to allow crops to germinate and establish well enough ahead of falling winter temperatures. There remains the risk that Russia could impose export restrictions in the new calendar year. The Ministry of Agriculture of the Russian Federation predicts the Russian wheat harvest has reached 87.1 million tonnes so far, but this is subject to drying and cleaning. Last season, conditioning losses were put at four million tonnes which, if repeated, would leave about 83 million tonnes. This aligns with estimates from most analysts and the USDA.

  • Analyst increases EU wheat production

Analysts Stratégie Grains has made minor revisions to its EU wheat crop estimates, increasing wheat production by 200,000 tonnes on last month to a new total of 129.5 million tonnes. This is 17.2 million tonnes down on last year. Yet, interestingly, it increased its export target by two million tonnes to a new target of 25 million tonnes. This is 10.5 million tonnes down on last year. Regardless, at this stage, it seems it would be a hard target to meet. Exports between 1st July and 11th October 2020 reached 5.73 million tonnes according to the latest data from Brussels. Average weekly shipments will need to increase by 140,000 tonnes for the rest of the season for the target to be reached.

  • Mixed weather and its impact for Southern Hemisphere crops

Prolonged dry weather in Argentina has lead to a lower-than-expected wheat area and compromised yield potential. This week, the Rosario grains exchange cut its production estimate once more to a new total of 17 million tonnes. This is below previous estimates from the Buenos Aires Grain Exchange of 17.5 million tonnes and well below last week's estimates from the USDA of 19 million tonnes.

Meanwhile, some private estimates for Australian production see the potential for its wheat crop to reach 30 million tonnes - almost double the volume of last year's harvest. Last week, the USDA made no change to its estimate of 28.5 million tonnes. The arrival of Australian wheat to the world stage will be welcomed by the world's major importers who are suffering from rising wheat prices. However, Australia is seeing plenty of rain in the east and this could delay harvest and harm quality.


BARLEY

  • Feed barley prices poor

Barley prices rose this week as global grain markets posted significant gains. However, feed barley remains the poor relation, trading at an almost $40/t discount to wheat at Black Sea ports.

Competitively priced suppliers from Ukraine have been exporting barley at a fast pace, having already shipped three million tonnes this season from a four million tonne surplus. French barley prices gained over €6/t, benefitting from further sales made to China where a tighter sales specification secures a $20/t premium to Black Sea supplies.

  • EU barley prediction impacted by cuts in French estimates

The prediction for 2020 French barley production was cut by almost one million tonnes in the October report from analyst Stratégie Grains following adjustments to yield and quality since last month. In its report, the French crop is now estimated at 10.5 million tonnes - 3.2 million tonnes down on last year. This impacts overall EU barley production, which is 800,000 tonnes down on last month to a new total of 63.8 million tonnes. The amount available for export was cut by 400,000 tonnes to seven million tonnes - 1.1 million tonnes below the exportable volume last year.


OILSEED RAPE

  • Range bound currencies influence the market
This week, UK rapeseed prices have come under slight pressure due to a combination of range-bound sterling against the euro and a lack of both grower and consumer interest. Despite this, the oilseeds complex has a pivotal time ahead of itself in the next month.

  • Approaching rainfall is promising for South American progress

South American plantings are well underway with continued concern over dryness in the region. Brazilian growers are experiencing extremely dry conditions during their peak planting period. However, rain is expected soon and Argentinean growers are due to start making progress under the conditions of a strengthening "La Niña" (cooler than average temperatures), which is due to last though into the new calendar year. Until there is any positive news coming from South America, it looks as if its piece of the oilseeds complex will remain firm.

In other weather news, Europe and Black Sea regions remain dry during a key establishment period which, if unchanged, will be of interest to the trade in coming weeks.

  • Market monitors import and export uncertainties
In the week ahead, the main factors influencing the domestic market will be the combination of Brexit and Covid which are continuing to dictate much of the oilseed rape price makeup; whether that is through fluctuations in currency or demand related directions. In conjunction with unpredictable import and export in the UK, similar uncertainties rest in China, where soybean imports have a great bearing on the global oilseeds complex.

 PULSES

  • Lack of demand for feed beans

Feed bean values have slipped back £2-3/t this week as exporters have finally got the first wave of vessels covered. In addition, a number of buyers have decided that feed beans are not good value at current levels and have been selling back cargos as their end markets no longer require beans. This has been particularly noticeable in Egypt where feed beans have previously been cleaned and upgraded to low-quality human consumption. However, with current low premiums, this process is no longer worthwhile.

  • Top quality spring beans headed to Sudan

There has been some activity with top quality spring beans, which will need to be colour sorted and bagged for the Sudanese market. This is a small market fraught with difficulty for the exporter due to a lack of dollars and a very unstable economy.


 FERTILISER

  • Urea/nitrates

Autumn sowings have yet again seen little progress due to poor weather and it is thought that the UK is at the 65-70% drilled stage. Although this is behind ideal progress at this stage, it is still far ahead of this time last year, when drilling was at no more than 25%.

On the back of this, fertiliser markets remain quiet. However, it is noticeable that interest is coming forward in parts of the UK where farmers are close to autumn drilling completion.

India has returned to the market for urea and it is thought that the country is looking to purchase between 1.5 and 1.8 million tonnes. A tender this size would allow them to delay a return to the market until the end of November at the earliest. Prices have firmed on the back of this. Full offer details are yet to filter through and what effect this has on the European market for both urea and nitrates is yet to be seen. Forward terms are expected over the next few days and will no doubt be reflecting tight supplies and currency.

Indications show plenty of support for the market going into early 2021.

  • PKs

Phosphates continue to climb in value due to large demands elsewhere in the world, resulting in increased offer prices to the trade. Current supplies are now being drawn down and these new values will work their way into the market. Potash prices remain flat with supply lines fair. As mentioned in last week's report, it should be considered that PK values are at a ten-year low and, with 2021 crop values being attractive to lock in, it makes good sense to cover your requirements for the season.

There is also a marked increase in interest of polysulphate-based grades, offering a well balanced ratio of potash to sulphur. Please speak to your local Frontier contact about the benefits of these tailored products.

Planning all nutritional requirements pre-Christmas is advised, as supply may well be affected by Brexit and the continued impact of Covid-19 in the coming months.


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.


Frontrunner - 9th October 2020

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