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Frontrunner - 23rd June 2023

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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 farm trader, Sophie Whiteman. 


WHEAT

  • Wheat prices up over 20%

From early 2023, speculative funds had built near record short positions in agriculture futures markets. The Chicago Board of Trade (CBOT) wheat market alone received over 120,000 contracts which is the equivalent of over 16 million tonnes. This process helped wheat prices decrease to multi-month lows at the end of May, but the current month has seen a price recovery.

Persistent dryness across much of the US corn belt and Northern Europe threatening yield potential, coupled with fears over future Black Sea supplies has led to a spell of short covering in futures markets and higher prices. The scale of the price gains has accelerated this week and CBOT wheat futures have now risen by over 21% since the beginning of June.

Concerns for US corn crops and their yield potential were highlighted on Tuesday evening when the United States Department of Agriculture (USDA) updated its weekly crop condition report. Condition slipped by six points to 55% rated 'good/excellent' which is the worst score at this time of the year since 1992. Illinois is one of the primary corn producing states where the crop condition is at just 36% rated 'good/excellent'. Adding to US crop concerns was a worsening spring wheat situation which has dropped nine points on the week to 51% rated 'good/excellent'. The USDA expects US farmers to achieve a record trend yield but that is now unlikely unless a spell of widespread rain arrives to aid the drought-impacted crops. We might expect cuts in US corn production estimates from the USDA next month.

  • Black Sea exports in question

Barely a day passes without the press reporting on Russia's latest comment regarding the Black Sea export corridor deal which needs agreement from all parties to renew next month. In recent months, the conflict between Russia and Ukraine and the potential interruption to Black Sea supplies has had a notable impact on wheat prices but, with it increasingly likely the deal will fail, the price impact is relatively small. This week, Russian officials said the 18th of July will be the time to end the grain export corridor deal, although the country did not rule out fresh talks with the UN. The UN has told Russia it can do nothing to resolve its grievances, such as western sanctions on their banking systems. Russia has reportedly said it is 99.9% certain it will quit the UN brokered deal.

Russia continues to offer wheat cheaply in world export markets, despite the rally in world futures wheat markets. This week Russian wheat was sold to Algeria at a low price of $261.50/t, including all shipping costs. The sterling equivalent of this is £204.50/t, at the time of the sales for wheat with milling quality.

  • UK prices up despite lacking demand

London wheat futures continued to rise this week following the sharp price increase evident in world grain markets. UK futures prices are up 15% from their end of May multi-month-low. Domestic consumer demand is extremely thin in the UK and UK wheat prices are struggling to compete on the export market. In addition, UK old crop remains heavy and it seems likely that a carryover of almost one million tonnes will remain as stocks exceed commercial demand.

Recent rain following a prolonged dry spell leaves an upbeat view for 2023 UK harvest yield prospects. The crop is reaching the USDA estimate of 15.7 million tonnes which adds to the burdensome domestic supply.


BARLEY

  • Southern EU barley harvest starts

While the Spanish crop and its problems are well known and already priced into the market, combines have just started to roll in Bulgaria, Romania and Southern France. The French crop is showing yields 5% higher than the long-term average and quality in terms of bushel weight, moisture, screenings and nitrogen is all satisfactory. However, in Bulgaria and Romania there are unconfirmed talks of poorer quality, especially bushel weight. Rains have been excessive in this part of Europe. The UK harvest will start mid-July with the a slightly above average yielding crop of reasonable quality expected – although nothing will match last year's fantastic figures.

  • Harvest values discounted, forward values somewhat higher

The carryover of crop '22 supplies in the EU states bordering Ukraine's wheat and maize areas, combined with the upcoming supplies of crop 23 feed barley, are keeping heavy price pressure on harvest prices here in the UK. Add to this the fact that sterling is at a six-month-high and the cost of large-sized vessel sea freight is low means Spain has plenty of cheap offers of feed barley for July and August from the Black Sea area. The impact of the Black Sea export corridor deal is minimal at present, but there is a question over how long cheap supplies will last. On the plus side, we have seen a good volume of UK compound buying interest this week and a few merchants in the forward month are looking to cover their short purchases or build a long purchase. Prices for the winter months are £20/t more than harvest – this is very unusual. As the UK is currently not very competitive to export in any position, the forward prices are worth selling for a portion of your feed barley harvest.

  • Malting barley prices stall after big rises

Recent rains over most of the UK, Northern France and Germany have stopped the price rising in malting grade varieties as rains have come at a good time on the spring barley where dryness was a concern. The premium over feed is approximately £75/t. Demand is limited now at these higher numbers and the maltsters will await harvest results on the winter barley before deciding their next move. Results of the early supplies of French winter barley are good but there is a long way to go yet. France and the majority of England now have enough moisture to see the crop through. However, Scotland, Denmark and Sweden will need more to achieve an average crop.


OILSEED RAPE

  • Oilseeds markets react aggressively to biofuel news

This week we saw the delayed release of biofuel mandate targets from the US Environmental Protection Agency (EPA) which set out its mandates for vegetable oil and plant-based ethanol content in fuel blends for the coming three years. Whilst increased from previous targets, the announced numbers came short of what the trade expected and disappointed those who recently made heavy investments into the sector to increase production capacity. The reaction in the market was strong, particularly for US soybean oil futures which instantly traded at 'limit down' which is the maximum decrease that can occur in a single trading session. This caused the exchange to increase movement limits for the preceding session and resulted in some softness for rapeseed prices too - but not to the same extent. In biofuel news closer to home and in continuation from last week's report, three Chinese companies have been suspended from selling biodiesel to the EU because they were unable to verify the source of their feedstocks. Audits suggest there was palm oil content which is against EU regulation.

Currently in world rapeseed markets, Ukrainian seed is the cheapest origin as large risk discounts have emerged as the continuation of the export corridor agreement looks tentative. This would make getting seed purchased ex Ukraine difficult to access, although seemingly buyers are willing to take the risk at these discounts. In Europe, new crop farmer selling remains slow mainly due to dissatisfaction with prices relative to the last few years. However, as we get closer to harvest it is likely there will be more engagement from farms.

Weather remains a strong driver of these markets amidst political and demand worries. Currently, European weather is largely favourable and Northern Europe - the only real distressed area - has seen some needed rains in the last week. The two other large rapeseed producing regions, Canada and Australia, remain comfortable enough for now. However, Canada is starting to lose soil moisture so the market will be keeping an eye on that to make sure they produce the 18.5 million tonnes that has been estimated. US weather is probably the most important weather market at the moment as its soybean crop is in early development. Last week, the dryness there gave the market some strength - whilst this has eased off slightly with some moisture being added, it is still a huge factor for price movements. 


 PULSES

The past month has seen a pickup in demand for old crop beans and with almost no old crop coming from farm anymore, we have seen quite a significant rise in traded prices. There doesn't seem to be the supply to satisfy all the recent demand; whether this continues until the end of this crop year is much more uncertain. The market could soon return to last month's low volume, but the market is quite tight currently.

With a favourable mix of rain and sunshine, we would expect new crop yields and quality to be strong if the current weather remains. Despite these favourable conditions, farmers do not seem to be in the selling mood and the market as a whole hasn't traded much 2023 crop at all. Hopefully with continued favourable weather, growers will have more confidence to start selling some volume. 


 FERTILISER

  • AN/urea

Following on from last week's Indian Rashtriya Chemicals and Fertilisers (RCF) tender, granular urea values have firmed around $40/t over the past ten days. This is significantly based on the lack of physical stock availability elsewhere being offered out. With gas values also continuing to remain firm, any thoughts on a weakening market looks far off now. UK suppliers are keeping a close eye on the market and current offers are tight in terms of ammonium nitrate (AN) supply, whether domestic or imported. Offers could be withdrawn without notice.

  • UAN

Our liquid offering is still available for summer and autumn tank fill and uptake has been good despite a slow start early last week. Suppliers are being cautious with regards to their offers and on that basis, we urge any growers still to place their orders to do so at the soonest opportunity. We expect NP starter fertiliser values next week.

This week has also seen a significant increase in interest for foliar urea product as crops reach the appropriate growth stage. Applications aimed at increasing protein in milling wheat are underway. Product is available for prompt delivery in both bulk and IBCs for growers without bulk liquid storage.

  • NPKs/PKs

There has been some good activity on grazing and silage grades, especially given the rain that we have received over the past week across the UK. Good grass yields remove a lot of nitrogen, phosphate and potash. Because of this, we advise replacing the nutrients lost especially if further silage cuts are to be taken. Going forward markets appear stable.

With harvest only a few weeks away and oilseed rape establishment high on the agenda, we advise growers to look at their requirements and tailor their needs for July delivery.


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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