Frontrunner - 23rd May 2024

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WHEAT

• Black Sea supply questions rallies markets

Further cuts to Russian 2024 wheat production estimates and concerns for Ukraine output have reignited speculative buying interest, sending futures markets higher and setting new recent highs. Chicago Board of Trade (CBOT) wheat rose to its highest since August 2023 and French wheat futures to their highest since February 2023, whilst London futures struggled to match the pace as sterling continued to appreciate versus the euro.

The Russian Ministry of Agriculture reported that 1% of its total wheat area had been lost to frost - a total of 830,000ha. The Institute for Conflict Studies and Analysis of Russia, IKAR, cut its Russian wheat production estimate further, from 86 million tonnes last week to 83.5 million tonnes - 4.5 million tonnes below the United States Department of Agriculture estimate and 8.5 million tonnes lower than last year.

IKAR also cut its Russian 2024-25 wheat export estimate to 45 million tonnes, which is now seven million tonnes below the USDA estimate made earlier this month. Analytical agency APK-Inform said frosts may lead to losses in 20-30% of wheat and other spring crops in Ukraine, but the Ukraine state weather forecaster said the recent spell of frosts had not caused significant damage to crops.

Ukraine 11.5% protein wheat was reported to be offered at $215 FOB, the sterling equivalent of which is £169 per tonne and compares with London November '24 wheat futures of above £220.00. This highlights the reality of over supplied old crop physical wheat versus the uncertainty of future new crop supplies.

• US crop prospects encouraging

The winter wheat crop condition was expected to gain one point, but instead lost one and slipped to 49% 'good/excellent'. However this is still well ahead of last year's figure of 31%. Spring wheat planting reached 76% 'done', up five points on the week and well ahead of the 65% average.

Corn planting is catching up at 70% 'done', up 21 points on the week and now just one point behind the five-year average.

The Kansas crop tour concluded with average yields of 46.5bu/ac, up from the five-year average of 42.5bu/ac. Last week's USDA World Agricultural Supply and Demand Estimates (WASDE) had Kansas at 38bu/ac. Following a one-day crop tour, the Illinois Wheat Association estimated the state's average wheat yield at 104bu/ac, up from 97.1bu/ac last year. However, the USDA estimates this year's Illinois crop at 83bu/ac, down from last year's record of 87bu/ac.

• EU crop prospects improving

French crop condition is stable at 64% 'good/excellent', which is still well below last year's figure of 93%. Analysts, Stratégie Grains, increased its 2024-25 EU wheat production estimate from 121.8 million tonnes to 123.5 million tonnes, with higher output expected in Spain. The country's improving domestic crop prospects will significantly reduce its import needs.

The French National Institute for Agricultural and Seafood Products, FranceAgriMer, previously increased French old crop carryover stocks to 3.9 million tonnes from 3.75 million tonnes, due to slower than expected export sales, but some expect this to rise above four million tonnes.

BARLEY

• Buyers watch price rises but don't buy feed barley

Merchants have been unable to engage buyers on new crop purchasing due to the market being too volatile. This has resulted in sharply higher prices, which have taken the supply chain somewhat by surprise. Growers have only sold limited amounts due to the relatively large discounts to other crops, which if they were to remain would make barley an attractive proposition for maximum inclusion in rations.

• Dry weather and frosts in Ukraine and Russia reduce barley crop

Recent news of barley crops affected by frosts and stories of slow Russian spring wheat and barley sowing - caused by these weather issues - has given underlying support to the markets.

OILSEED RAPE

• EU markets rise while UK ex-farm steadies

European rapeseed prices have continued a steady upwards trajectory this week, as concerns over the EU crop condition and potential transport challenges from the Black Sea area have come to the forefront.

A strong pound has reduced the extent of the gains for UK ex-farm prices, as UK inflation figures came out slightly higher than analysts expected. Old crop crushers are well covered in the UK and now turn their focus to originating new crop seed for what is set to be a variable year for the domestic crop.

Elsewhere in oilseeds, soybeans have maintained some of their recent price gains as floods worsen in Brazil and palm oil becomes discounted to other vegetable oils given weak export demand and a seasonal increase in production occurring in that market. 

 PULSES

• Tight supply of old crop and firm new crop values

Old crop bean markets continue to tighten as there are very few old crop beans left to trade. Demand may be limited, but a few buyers are unable to switch to other substitute raw materials, so will have to pay whatever it takes to get covered.

New crop bean values are also very strong, which is also due to a lack of sellers and several buyers needing cover to service their own customers. Recent values would suggest that premiums of £50 -60 over ex-farm wheat values are achievable for November or December movement. This is £20-30 more than those seen over the previous four years. Recent warm weather and plenty of rainfall is ideal for the growing crop and we would expect these premiums to come under pressure in the coming weeks, especially as Baltic beans are trading at a €30/t discount to UK values.

 FERTILISER

• Urea/AN

As we head towards what is traditionally the UK's new season period, prices in Egypt continue to firm, with a rise at the end of last week of around $35 which was mainly due to increased buying to cover shorts.This has caused many suppliers to be cautious, with some withdrawing from the UK market until prices settle.

There is still demand on farm for new season urea prices - although at this stage the volumes purchased remain unknown, with some buyers only covering a small percentage of their requirements. The market looks like it could be heading towards some volatility in the next few weeks.

Farm economics are looking much better. An uplift in grain prices recently - due to reduced Russian crop volumes - has prompted some growers to purchase a percentage of their crop '24/25 requirements, as the break-even ratio currently looks good.

In France, chemical company Yara International released values to the market for June delivery, with a limited new season offer that equated to around £315 per tonne on farm. The offer was so well received by the French market that it was subsequently withdrawn and Yara has since reissued new terms with an increase of approximately £13/t, with volumes yet again restricted.

In the UK, spot ammonium nitrate continues to see a good uptake, with demand continuing much later into the season than would be the norm due to crops having been delayed because of the weather. CF Nitram remains competitive and is readily available for a prompt delivery for May requirements.

The price of natural gas and ammonia (which are both used in European and UK fertiliser manufacture) continues to remain higher than would be expected at this time of year. Traditionally, values would ease as we head towards summer and a new season reset, however, they are currently around levels last seen in February this year. These high prices appear to be a consequence of the uncertainty in the Middle East and the war between Russia and Ukraine.

• Liquid/UAN

The UK UAN market continues to remain competitive against AN and compound NS products for spot movement, with liquid nitrogen values unchanged as we move through into final applications on cereals for crop '24.

Liquid manufacturers have an eye on new season as we see urea values firm for crop '25, however at present the only values available in the UK for liquid nitrogen are for immediate delivery. Much like the AN market, good stock levels across the UK allow for prompt bulk delivery of UAN into on-farm storage, in order to meet additional crop requirements - whether this be for arable, grassland or maize.

With milling wheat premiums at higher levels than seen for some time, the return on investment for achieving the required contract specified quality is significant. Products targeting protein increase for application at GS69-75, milky ripe, are available in both IBC and bulk.

• Straights/PKs

Phosphate and potash values remain the same, but the outlook is for a possible easing in price over the next few weeks though this won't be a large reduction.

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