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Frontrunner - 20th July 2018

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WHEAT 

  • UK prices firm again

Domestic wheat prices firmed a further £3-£5 this week, despite harvest progressing well across Europe. In a year when UK wheat output is forecasted at or below 14 million tonnes, we will be relying more heavily on imports and therefore price movements around Europe affect us more than normal. Crop reductions in some key exporters such as Russia, Germany and France pushed EU wheat prices firmer, with Matif trading to contract highs of €191 at the end of the week. Combine this with a weaker pound and imports become increasingly expensive, so attention quickly shifts back to the tight UK balance sheet.

  • Northern Hemisphere harvest underway

The wheat harvest is the USA is progressing well and harvest is now 65% complete which is 4% ahead of the average pace and spring crop ratings have been increased to 80% good/excellent, a 43% increase from last year. If realised, the USA could produce 3.8 million tonnes more wheat than last year at 51 million tonnes. Russian harvest is now around 30% complete, with yields falling just below 4t/ha which is roughly in line with trade estimates. Most reports still forecast an 18 million tonne crop reduction in Russia, the world's biggest exporter. Across Western Europe, early wheat harvest reports in France and the UK suggest 5-10% lower yields year-on-year, but generally good quality which, if sustained, could push premiums lower.

  • 2019 crop prospects

Before most of the UK considers harvesting 2018 crop, it's worth briefly mentioning the dynamics surrounding next year's wheat marketing. It looks likely that, with 2018/19 crop prices where they are, we will see a bigger area of wheat drilled in the coming autumn so could see a return to bigger domestic supplies. Adding to this the huge uncertainty of Brexit and question marks over demand for UK wheat, at current levels around £6-£8 discount to '18 crop, a sensible risk management strategy would be to start selling a proportion of the 2019 crop. Please speak to your Frontier farm trader for more information and prices.


BARLEY

  • Winter barley harvest continues at pace

As the winter barley harvest spreads around the country yield reports are mixed, but specific weights look higher than last year. This is probably a result of the high hours of sunshine in the last couple of months. Yield reports are not too disappointing, bearing in mind the dry conditions experienced recently by many. The best description we can give for average yields is that they are probably a little lower than last year at this moment. Malting quality also looks mixed, with plenty of low nitrogens but also low retention, which is spoiling many samples. Spring barley harvest across France is well underway - yields are lower than expected but quality is good.

  • Feed barley market rising

Feed barley values in the UK have followed wheat values upward. Domestic prices lead the way as the export market remains quiet. Feed demand for barley in the UK this winter is expected to be good, with the drought taking its toll on forage stocks available from this summer.

  • Malting barley values remain strong

Malting prices remain strong across Europe. The market is quiet with a lack of sellers as the main feature. The market awaits quality and yield information from the spring barley crops in the drought affected areas across Europe, particularly Denmark and the UK.


OILSEED RAPE

  • World news

European rapeseed currently remains the most expensive oilseed in the world, with a weak sterling and strengthening Matif helping UK values this week. This high price, however, makes other oilseeds look more attractive to European crushers as they continue to import various different oilseed packages.

Australia continues to be dry due to an El Nino weather pattern.It is possible we could see their canola production drop back by 100,000/200,000 to the 2.9-3.1 million tonnes range. Canadian conditions have seen changes move from ideal to hot and stormy weather, which could be detrimental towards their canola crop although temperatures and precipitation remain above normal for the time of year. This should guarantee a well above average production level.

Northern European yields continue to disappoint. OilWorld suggested an EU28 crop of 20.1 million tonnes, down 0.6 million tonnes from last month's estimate and sharply below 2017's 21.8 million tonnes production figure.

  • UK harvest update

The UK OSR harvest is well underway, with average yields down from last year's bumper crop but remaining near running average levels. The long spell of dry weather we are currently seeing could cause new season planting issues in parts of the country if it persists. Moisture levels continue to be of concern to growers who need to cut their crops late at night/early in the morning to maintain above 6% moisture. Vigilance in this area will be key this harvest.


 PULSES

  • Harvest

The pea harvest has started in the South and East but yields and quality are very variable. Most of the marrowfat samples we have seen are very bleached, with a lot of insect damage and generally low yields. The large blues are faring better, with generally good strong colour and only slightly reduced yields. It's too early to establish new crop pea values but expect to see levels £20-30/t above last year.

  • Weather

Beans are struggling in the heat – many spring crops are running out of steam, with poor podset and lower leaves falling off. Winter beans look more encouraging, with many more pods and beans per pod. Values continue to follow wheat so are £5-£10/t higher this week depending on location.


 FERTILISER

  • Nitrogen

While the UK continues to gather in the harvest, buying nitrogen is quite low on the list of things to do at the moment. The UK nitrogen price is still undervalued against European offers and this week, Yara announced a €13 increase to the French 33.5% nitrogen price for November delivery. This is a good £15/t higher than UK levels and means any import offers we're seeing are higher than our current CF Fertilisers offer for November. All European producers are facing higher ammonia and natural gas prices, both of which could increase again. CF Fertilisers' current Nitram offer may be removed shortly to keep them in line with Europe.

Granular and prilled urea markets are also very quiet, as would be expected at this time of the year, but any possible price fall needs to be watched versus current currency movements.

  • PKs

There is lots of talk in the market about further increases in MOP/TSP/DAP offers but, with reduced demand whilst we are harvesting, it may be a struggle for the suppliers to conclude business at higher numbers. Speak to your farm trader for any spot offers. There is some small demand for DAP at the moment but unless we start to see some rain in the forecast for autumn, drilling could be a challenge.

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