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.
World wheat prices continued to fall this week, extending the decline that has prevailed since the beginning of 2024. The Paris and London wheat futures markets both fell to new contract lows - the lowest prices seen since July 2021. Over supply and slow demand have encouraged speculative selling, with managed money traders holding record short positions in the Paris market.
This week the EU Commission increased its 2023 EU wheat production estimate, by 200,000 tonnes on last month to 125.9 million tonnes. However, it left the export estimate unchanged at 31 million tonnes. Year-end stock will rise by 700,000 tonnes to 19.1 million tonnes and this heavy balance sheet adds to the negative tone of this week's market.
UK wheat prices - although at their lowest for two and a half years - remain above the levels needed to compete to export. With a little more than 120,000 tonnes shipped so far this season, the carryover stock looks set to exceed three million tonnes which is encouraged by an increasing carry in the market.
The November '24 London wheat futures price premium has extended to £17/t above the old crop May '24. The only positive highlight for the UK wheat market are the Group 1 bread-making premiums, which reflect the costs of imported supplies and extend to between £65-70/t, depending on location and position.
Early estimates suggest a smaller area drilled to winter wheat for the US 2024 harvest. Earlier this month, the United States Department of Agriculture (USDA) published its planting survey and surprised traders with a figure of 34.43 million acres, an area almost 2.3 million acres below last year. However, this deficit could in part be made up by higher yields.
The latest updates show that the condition of winter wheat is significantly ahead of the same period last year. In Kansas, the primary winter wheat producing state, 54% of the crop is rated 'good/excellent' - up 11 points on last month and well ahead of last year's figure of 21%.
There are relatively small monthly declines for the other major winter wheat producing states, with Texas and Oklahoma now at 42% and 63% respectively. This compares favourably with last year's figures when Texas was only 14% and Oklahoma 17%.
Poor US weekly wheat export inspection numbers did little to inspire buyers of Chicago Board of Trade (CBOT) wheat futures, with figures 265,000 tonnes below the bottom-end of trade expectations pitched at 350,000 tonnes.
Sales may be ahead of last year by around 3%, but the pace of ships loading is lagging and not bringing confidence to the market. With a USDA-estimated total of 19.73 million tonnes to meet, just under 11 million tonnes has been shipped so far and this is 17% behind last year. This will, however, still leave end stocks two million tonnes up on the year, at 17.62 million tonnes.
In the absence of major domestic interest from UK compounders, selling from farmers and merchants has pushed feed prices lower again this week.
New crop winter prices had, in part, been propping up the market. However, a fall in these prices has further exasperated the situation.
There is no export interest of any note and barley from East Anglia has been pricing into the North-West of England and Yorkshire. A price recovery will only happen if the Brazilian corn crop enters a drought situation. This possibility is still a month away and therefore prices may drift further if growers need money to finance the inputs required this spring and summer.
With crop '24 values falling to around £5/t over the last week, growers have turned their backs on the latest values and sold very little.
Recently we've seen many growers choosing to commit more grain into the Frontier pools, due to their good performance and the challenges with deciding what will be a good price for next year.The current discount of £25-30/t to wheat so early in the marketing year will attract much interest from English compounders, as and when livestock producers and supermarkets eventually step into cover their forward requirements.
Rapeseed values trended lower this week after sharp increases in levels the previous week, triggering a selling response from long holders.
Currently, rapeseed prices are strongly correlated to crusher needs as they look to cover their nearby requirements. This is because other origins (namely Australian seed) are not available until later in the season due to delays in the Red Sea.
Soybeans also continued a downward trend, as weak economic data out of China and reports of Brazilian beans trading into the US impacted market sentiment. South American weather also remained a key focus.
In end-product markets, rapeseed oil has been trading below soya, sunflower and palm oil and continues trying to find demand for production surpluses.
Urea values are maintaining momentum, having now risen $75 off the floor price seen in early January. The firmness in the market is mainly due to strong demand and tighter production flows.
It is predicted that there will be further rises over the coming weeks and suppliers in the UK are now reflecting these increases to the market, with pricing changing almost daily.
Please remember that in England only, any urea product above 1% nitrogen applied after 1st April must include an inhibitor to comply with regulations - this also includes liquid UAN.
UK AN continues to trade on farm for April delivery and currently remains very competitive in comparison to imports. As a result, sales have been brisk and we expect supplies to tighten over the next week.
Prices for spring deliveries are available and offer good value in comparison to AN and urea.
With urea values having increased, UAN values are likely to follow as we head into early spring so we advise you check your requirements.
Frontier also offers a wide range of liquid NPs and NPKs for spring/summer use.
Phosphates have recently shown signs of firming, mainly due to stronger demand from elsewhere in the world. Therefore, replacement cargoes are likely to reflect these increases during early spring.
Potash weakened last week, but markets have now stabilised on stronger sales in both the UK and Europe.
Delivery scheduling looks to be the main concern, with cargoes still due to arrive in UK ports. Please bear this in mind, as deliveries could be over a two-month period.
Winter rainfall across the entire UK has left its mark on cropping, with most farms sustaining damage to a percentage of their crops. This means that PH levels will have undoubtedly reduced across a large amount of this ground so it worthwhile studying any soil analyses and asking for additional sampling for any fields that are of concern.
For example, PH levels of 5.5 (acidic) can limit nitrogen uptake to less than 55% and similar reductions are shown in Ps and Ks. Our experts can support you with a range of granular, calcium-based liming products for use with your own spreading machinery, enabling spot treatment and providing excellent value and efficacy in comparison to bulk lime.
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.
As a subscriber, you’ll receive email alerts each time a new blog is published so you can always stay updated with the latest advice and insights from our experts