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Frontrunner - 1st July 2022

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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. The report this week is read by marketing assistant, Becca Russell. 


WHEAT

  • Egypt buys new crop wheat

The General Authority for Supply Commodities (GASC) made its largest single wheat purchase for over 13 years this week, buying 815,000 tonnes for shipment during August, September and October. Last weekend, the Egyptian Minister for Supply and Internal Trade said his country needed to import ten million tonnes of wheat over the next six months while having secured 3.9 million tonnes from local farmers and having wheat reserves sufficient for almost six months.

The tender results were dominated by EU origin wheat, amounting to 350,000 from France, 240,000 from Romania and 50,000 from Bulgaria. Only 175,000 was from Russia, with offers in forward positions difficult to make because of the uncertainty of any export tax that may or may not be in play. The nearby positions sold at an average, just below $433/t including freight and the forward sales of 240,000 tonnes for October were just short of $440/t including freight, all French. Yesterday, the World Bank agreed to provide Egypt with $500 million to help finance its wheat purchases.

The Egyptian tender highlights the competitiveness of EU wheat supplies and its ready availability. There were no Ukrainian offers, which graphically illustrates the impact the war is having on global wheat supplies. Global importers should be concerned given the EU is expecting a smaller 2022 wheat crop; at least six million tonnes below what was achieved in 2021 with the possibility of further cuts to production estimates for France, Spain and Hungary due to heat damage. Romania is expecting a crop 16% down on last year at a total of 9.31 million tonnes.

  • Record Russian wheat crop production and exports

The EU's crop monitor MARS is in line with other recent Russian wheat production estimates, seeing a crop of 88.8 million tonnes. Last week, analyst group SovEcon predicted a record for the Russian 2022 wheat crop at a total of 89.2 million tonnes and have increased its estimate for the country's wheat exports to a record 42.6 million tonnes. That compares with approximately the 33 million tonnes the United States Department of Agriculture (USDA) estimate will have been shipped this season. However, the ability to ship over 40 million tonnes of wheat isn't just down to the size of the crop. Tightening economic sanctions against Russia and access to shipping is an issue, as well as a reluctance of ship owners with punitive marine insurance to enter waters close to military conflict.

Russia's uncertain export tax scenario adds a further complication with a change in its formula for the calculation expected. This is to support shipments amid a strong ruble currency according to the economy ministry.

Beyond the early August position, Russian wheat offers were notably thin for the Egyptian wheat tender.

  • USDA stocks and plantings report triggers selling

On Thursday afternoon, the USDA published its grain stock estimates for the US and the acres US farmers have planted to wheat and corn. Although it presented a relatively neutral set of data, this report acted as a catalyst for another spell of aggressive selling which took US Chicago Board of Trade (CBOT) wheat futures to the lowest level since the beginning of March.

The corn planted area was broadly in line with trade guesses at 89.921 million acres, which remains notably below the previous year when 93.357 million acres were planted. This is half a million acres up on the March report from the USDA estimate of 89.49 million acres. Corn stocks were also in line with expectations at 4.346 billion bushels, although this is up on stock levels this time last year which were at 4.111 billion bushels.

For wheat, the planted area proved to be slightly above expectations at 47.092 million acres, but this is below the March estimates of 47.351 million tonnes. Stocks were 660 million bushels, just above expectations and well below last year's 845 million bushels.


BARLEY

  • Early harvest for barley

The UK barley harvest has started this week, significantly earlier than crop 2021. Areas harvested so far are small and not particularly indicative of what we can expect in the coming weeks. Especially with the bulk of activity likely to happen in the week commencing 11th of July in South and East Anglia, and a week later for areas further north. With harvest so close and a further drop in barley values over the week, farmer selling has slowed whilst some compounders have come to the market given the recent drop off in barley values. Export demand remains fairly quiet, with the market still clearing old crop stocks much like the UK.


OILSEED RAPE

  • Prices reverse

European rapeseed prices have now returned to levels last seen four months ago. During this period, markets rose by over £150/t but the last six weeks have seen all of these gains given back. It would be encouraging if this latest market move was down to an improving situation in Ukraine and the Black Sea region, but this is not the case. It has more to do with the realisation that world oilseeds markets in 2022/23 are looking to be much better supplied than the current campaign. There are clearly many assumptions that have been made on weather, politics and macro-economic factors to reach this conclusion but it is becoming increasingly difficult to see next season as a year of shortages.

  • Rising stock numbers

Oil World recently forecast that global oilseeds crushing would be up by 2.6%, but production of the ten major oilseed crops would be higher by 3.0%, led by soybean output which is seen up by 34 million tonnes. Year end stocks are seen climbing by more than 12 million tonnes with most of this increase showing in the critical soybean sector that is projected to enjoy a very comfortable stocks-to-use ratio of 26.3% by the end of 2022/23. European rapeseed production is predicted to be up by 1.2 million tonnes and Canadian canola is forecast to rebound by over seven million tonnes from the drought-ravaged harvest levels of 2021. Global year end stocks are predicted to grow by over two million tonnes but the stocks-to-use ratio will remain at a relatively tight 10.7% which points towards another season of high price volatility.

  • USDA report surprises on soybean plantings

However, markets are still capable of reacting to more short-term factors and the USDA June stocks and plantings report, published on Thursday, was a good example of this. Often there is a good consensus amongst traders on what might be contained in a USDA report but this time there was an unusually wide range of views on both the stocks and plantings numbers. Stocks were revealed to be close to the average trade view but, despite soybean plantings coming in at 1% more than last season, the actual level of US plantings - at 88.3 million acres - was well short of the trade consensus forecast at 90.4 million acres.

Markets have reacted positively to the news with US soybean futures showing modest gains in early trading.


 PULSES

  • Dramatic market falls

With markets falling so dramatically in the past two weeks, many pulse buyers are too nervous to make any further buying decisions.

Animal feed compounders in the UK and Europe have seen big falls in other mid-range proteins, with rapeseed meal now £100/t lower than the recent highs. This fall has pushed feed peas and beans out of many rations, with values needing to fall a further £10/t to be competitive again.

  • Limited sales from UK to Egypt

Buyers in Egypt are also preoccupied trying to sort out the long of old crop Australian beans in its market and with another big Australian harvest likely again this year, there will be a limited opportunity for the UK to sell beans to Egypt.

Crops of both beans and peas continue to look very promising in most areas of the country, and even with the recent fall in values, we expect to see further declines as there is very limited demand at current levels. 


 FERTILISER

  • Nitrogen/urea

Ammonium nitrate prices remain unchanged this week with little demand from growers. The gas price in the UK continues to rise and at the time of writing is £2.55/therm. It is reported that Russia has begun cutting off gas to countries it supplies in a move to reduce the ability of gas storage before the winter. This has caused supply cuts in Italy, Austria, the Czech Republic and Slovakia. Gas has also been shut off to Poland, Bulgaria, France and the Netherlands. Whilst the UK isn't reliant on Russian supply, it is subject to wholesale prices hence the increase in the UK gas price today. Unless we see a dramatic change in energy costs, or confidence around gas supplies, we should be prepared for the market on ammonium nitrate to remain firm and supply continue to be very tight.

We have seen urea prices decreasing in the US due to lack of demand and lower energy costs. However, urea values in North Africa have risen by over $100/t as Europe looks to cover shorts due to gas prices firming.

  • Liquid

This week saw the withdrawal of our initial UAN offering for spring 2023. The limited tonnage available meant product was specifically offered for February to March delivery. Fresh offers are expected in early July - again for a full range of straight nitrogen and nitrogen sulphur grades - which will offer existing UAN users the opportunity to cover additional requirements for later applications next spring.

Autumn offers remain in the marketplace for growers still to commit to filling their on farm tank storage, or for those looking for nitrogen sulphur products for application on oilseed rape at establishment.

Any growers using liquid fertiliser (not including the OMEX N P grade) to establish oilseed rape this summer should include Limus Clear within this UAN application. With warm temperatures, exposed soils and low crop cover, this application is at high risk of volatilisation and Limus Clear can minimise any risk of nitrogen losses. Please speak to your Frontier contact for further information on Limus Clear, which is available across our crop protection stores.

  • Phosphates and potash

We are seeing very little interest in the potash market, with MOP values currently mid to high £700's for July delivery. However, the outlook seems firm with 40% of the supply market (Russia/Belarus) not available. Traditional nitrogen sulphur grades are also tight in supply; therefore it is advised to look at alternative systems in the way of polysulphate as another option on nitrogen sulphur products. Polysulphate prices will follow the trend of the MOP market. Phosphates remain firm and TSP/DAP offers are unchanged with no new interest from farm at these levels. DAP availability will remain tight. In light of tight supplies on DAP and ammonium nitrate, growers will need to prepare for drilling oilseed rape. Oilseed Start is a credible alternative to DAP and is available in the grade 24-24-0+8S+boron. This grade efficiently supplies nitrogen and all the essential phosphate that are vital for good establishment. In trials it gave a 0.82t/ha yield increase. Please speak to your Frontier contact for further information.


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. 


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