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Frontrunner - 17th May 2019

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WHEAT

  • What a difference 24 hours makes

On Monday we returned to markets which were still digesting last week's bearish USDA report and under some significant pressure. Global prices were sat at contract lows and the hedge funds in America held huge short positions after bigger than expected global stocks were forecasted in the report. Spill-over pressure also weighed on UK prices, with old and new crop trading to new lows across futures and physical markets.

Come Tuesday, the market turned around sharply as a fresh set of US spring planting data was released. It was reported by the National Agricultural Statistics Service that corn planting was at 30% versus a 5-year average of 66%, due to widespread rainfall inhibiting land work. The window for drilling spring crop is narrowing and this corn story was enough to trigger a round of buying across all agricultural commodities. Despite much more favourable growing conditions throughout the EU, wheat prices in the UK followed suit and November LIFFE futures traded £7 firmer to highs of £147.50/t on Friday. This is proof that global prices are sensitive to weather stories but, given the overall bearish global sentiment, growers should be aiming to sell into any rallies that present themselves short term.

  • European crop update

One of the headline-grabbers in Friday's USDA report was an increase in wheat production for all of the world's key wheat exporters, including Russia, Ukraine and the EU. More specifically, this week Germany's association of farm cooperatives (DRV) revised their 2019 crop estimates to 24.28 million tonnes, up almost 20% on last year's heat-damaged crop. On maize, the French Ministry of Agriculture increased 2019 acreage 5% year-on-year at 1.43 million hectares, while the German corn area is set to increase 9% to around 450,000 hectares. This all adds weight to UK wheat prices as we've seen this year with feed compounders, distillers and ethanol producers all switching away from wheat onto cheap imported maize.


BARLEY

  • US weather boosts new crop UK feed barley prices
Delays to the planting of maize in the US Midwest states and the prospect of more setbacks have given futures markets in the EU and the USA a boost of around 5% since the contract lows of Monday. This has resulted in slightly higher bids by our EU export customers for physical supplies of barley this week. In addition, lower sterling due to more Brexit talks has helped our local values as well. The maize crop in the USA represents around 33% of world production so grain traders will be keeping an eye on it for the time being.

  • Overall current EU 2019 weather positive for yields
Continued showers this week, and more forecasted for the previously dry parts of Central and Northern Europe, create a higher yield potential than existed at the start of May. France looks to be particularly blessed with regular rain and now has the potential for higher than average yields. The other EU countries, when combined together, are expected to produce normal yields at best but that is a significant rebound from last year. Low water tables in many countries mean regular rains are needed to maintain current crop prospects.

  • UK sales of 2019 export spring malting barley start up
This week has seen the start of enquiries for supplies off the south coast from EU maltsters. Their interest is limited to October shipment only as Brexit uncertainty continues. With very little trade having been done so far for export it's good to see interest return, putting much needed bids under southern English supplies. The premium over feed barley is quite attractive. If growers have not made a start on marketing spring barley and need harvest or slightly later movement, this could represent a good opportunity to make an initial sale. Please speak to your Frontier farm trader for details.

OILSEED RAPE

  • Notable market movements

Oilseeds markets have been lively this week as a heavy mix of global politics and weather has sparked volatility. The week started off with a very negative feel, with funds continuing to sell down oilseed markets on the back of a forecast record carry out of US soybeans as the trade war with China ramped up. Last week saw the US Government imposing another round of tariffs on China and this week it was confirmed that China would impose further tariffs of its own on U.S goods. However, the weather eventually took the spotlight away from the politics.

  • Delayed plantings

After the close on Monday night (May 13th), the USDA issued the weekly plantings progress report and soybean planting was only at 9% versus 29% average for that time of the year. With the weather forecast up to the end of June still looking wet and the funds sitting with a record short, this sparked demand and oilseeds markets have rallied through the week.

  • Rest of the world

Canada is dry and plantings of canola are going ahead. Much debate continues about where Canada sells its exportable surplus without China. Europe and the Black Sea countries have seen decent rains and so far there are no real weather concerns in this region. Rapeseed crops are developing well.


 PULSES

  • Plantings were expected to be down

Trying to estimate plantings in advance of harvest for the minority crops is a difficult task. The AHDB Early Bird Survey published at the end of November last year was the first indication of farmers' plans and this showed an expected 8% reduction in pulses for harvest 2019. The same organisation will publish their May planting survey in July and the results from Defra's June Agricultural Survey will be published after harvest, finally giving us the definitive situation. In the meantime, the only indicators are anecdotal evidence and seed statistics.


 FERTILISER

  • Grassland

With final applications underway or finished in many areas for winter crops, most of the trade is focussed on grassland requirements. In particular, demand is picking up where farmers are looking to push grass yields to offset winter feed bills.

  • New season

In line with previous years, Europe has released its new season fertiliser prices. Yara and Borealis both made a move in France first, with Yara also going on to release terms for Germany and Benelux. As previously reported, a firmer urea market, worries over nitrate supplies and UAN anti-dumping has meant that prices this year are €27 more than the opening price in 2018. Producers will feel that this goes some way towards offsetting the higher natural gas price they have been contending with over the past 18 months. In the UK, we are waiting to see what the two main manufacturers decide both in terms of price and timing, although it would be expected that prices will be released no later than they were last year to avoid the logistical hassles that a delayed new season can bring.

  • DAP

Looking ahead to oilseed rape establishment, DAP has proven to be effective in promoting early vigour and also leads to yield increases. Current prices look attractive and growers are advised to book now.

  • Foliar

Foliar application of nitrogen will benefit both oilseed rape and cereals where the earlier dry weather may have impacted on the uptake from solid applications. Read more about the options available in our latest blog, or talk your Frontier advisor for details. 




View markets, set price alerts, manage contracts and take advantage of extended trading hours with
MyCropMarketing, Frontier's online grain marketing platform. 

22nd May 2019 - Midweek market report
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