Frontrunner - 24th March 2023

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WHEAT

• Export corridor deal sends markets lower again

Last weekend the Black Sea export corridor deal was renewed. Despite demands from Ukraine for a minimum extension of 120 days, all parties ultimately agreed to Russia's proposal of a maximum of 60 days. Russia said an extension of the deal beyond mid-May will depend on the removal of some western sanctions.

Russia has issued a demand for the Russian Agricultural Bank to return to the SWIFT banking system and for the import of agricultural machinery and spare parts to resume. These are sanctions currently imposed by the West in response to the Russia-Ukraine conflict. If these demands are not met, Russia has threatened to refuse another deal renewal and to undermine Ukraine's grain trade into Africa by supplying African nations with Russian grain free of charge.

Heavy selling from speculative funds and farmers alike took European wheat futures 8% lower on the week to their lowest level since the beginning of 2022. By mid-week, London wheat futures had lost approximately £50/t since the middle of February.

• Improving production potential adds to negativity

Further wheat price pressure came from improving production prospects for US and EU winter wheat crops. Recent rainfall has helped US weekly wheat crop ratings make a two-point improvement to 19% rated as 'good/excellent' for primary producing state, Kansas. Secondary producing state, Texas, was up six points to 23% rated as 'good/excellent'. Oklahoma, the third largest producer, slipped one point to 29% rated as 'good/excellent'.

MARS, the EU crop monitor, added to the negative tone with improved yield forecasts for EU winter wheat up to an average of 5.99t/ha. This figure compares to last year's figure of 5.8t/ha and the five-year average of 5.81t/ha. On the planted area, this adds four million tonnes and a potential EU crop above 131 million tonnes. French winter wheat crop ratings remain historically high at this stage - 95% rated as 'good/excellent' – supporting the upbeat view from MARS.

• Analysts 2023 Black Sea wheat

The Black Sea region will be a smaller wheat and corn producer in the coming season and therefore it might be expected to present less impact in world export markets during 2023-24. This week the Ukrainian Minister of Agrarian Policy and Food said that the country expects a 15.2% decrease on the year in 2023 for the county's corn harvest and that it may lower its forecast further.

The drilled area may fall from four to 3.6 million hectares because of a large area of unharvested fields from 2022. Corn production could fall to 21.7 million tonnes or even further from last year's figure of 25.6 million tonnes. Wheat production is likely to fall to 16.6 million tonnes from the 20.5 million tonnes in 2022.

Analyst SovEcon updated its Russian 2023 wheat production estimate to 85.3 million tonnes, which is considerably lower than the record 2022 crop of 104.2 million tonnes. Between the two traditional wheat export power houses, that is a potential drop of almost 23 million tonnes on the year.

BARLEY

• Old crop feed barley values fall

Old crop feed barley values have fallen approximately £20/t in all areas across the country, as barley followed global weakness in wheat markets over the week. The same headlines, such as the confirmation of the grain corridor for another 60 days, an increase in farmer selling across Europe and a continued lack of demand were just some of the main drivers with most of the loss in value seen Monday to Wednesday. Fundamentally, barley cannot withstand weakness in other markets given the lack of demand for UK barley from both the export and domestic markets. Currently, we estimate that the UK has exported approximately 850,000 tonnes of barley so far this season, but that could still leave the UK with 400,000 – 600,000 tonnes still to market in the final three months of the season. With compound demand still lagging, it is difficult to see any dramatic increase in domestic demand in the short term. Therefore, the UK will have to remain export competitive to find demand for the old crop barley surplus.

• New crop values also lower

New crop feed barley values haven't seen the same sell off that the market has seen on old crop, but they are still down approximately £13-15/t over the week. Farmer selling has been slow since the start of the new year and remains so, despite the fact that old crop values are now at a discount to the new crop positions. With the fall in feed barley values, premiums for malting barley have widened slightly but farmers are not selling in any sort of volume.

• North vs. South divide on spring plantings

The UK has largely planted its spring barley south of the Humber, with crops now starting to come through the ground. Plantings in the North of England are much more varied, whilst the Scottish crop is yet to be drilled. Drilling it in April is not abnormal and we could see planting get underway next week with a relatively dry and slightly milder forecast. 

OILSEED RAPE

• Record downward period for rapeseed – fundamentals or external factors?

For the first time on record, MATIF rapeseed posted 13 consecutive down days in the period ending 22^nd of March. The factors contributing to this are both fundamental to rapeseed and external macro-economic factors.

These external factors, including banking troubles and general economic unrest, have been weighing heavy across the entire commodities complex for the few last weeks as prospects for demand are seen to be lowering. If you combine these factors with a rapeseed market that was already supressed due to a large available supply, it all contributes to significant price pressure.

Whilst there has been an absence of trading activity in the period of 23^rd of March, rumours circulated that oil may have traded out of Europe with China being the buyer. This gave the market an opportunity to bounce back and encouraged buyers to come back into the market. It's also worth noting that managed funds remain significantly short of MATIF rapeseed futures. At some point they will want to buy this back which could give further support to the rapeseed market in the short-term. 

 FERTILISER

• AN / urea

On all fronts, markets remain subdued with little demand in the UK or indeed Europe. The recent drop in European gas prices and global ammonia levels has the market observing a continuous 'stand-off' as buyers pause whilst they gauge the direction markets are heading. Confidence is starting to creep in about European producers gently starting up ammonia production, but with demand low it's unlikely new physical ammonium nitrate availability will improve in the short term. Therefore the reductions in manufacturing costs won't be felt for potentially several weeks. Planning spot requirements for delivery in April is advised ahead of weather improvements and before the narrow delivery window causes seasonal logistical pressures.

Urea prices forward (June onwards) are weak but drawing little to no interest due to the lack of any comparative products. Prices in the UK have been revised down on the back of growing global stocks and improved exchange rates between the pound and dollar, offering more desirable replacement costs. The potential return of competitive nitrate alternatives on the horizon is causing markets to be cautious and growers should maintain a watchful eye only.

This week the anticipated new rules have been confirmed by DEFRA on the use of inhibited urea fertilisers and that they will be implemented from this year. The scheme will apply to most farm applications to crops after 1^st April 2024 and DEFRA states that products containing more than 1% urea will need to be inhibited. In a statement issued, the minister responsible said this decision was essential to ensure that emissions of ammonia are reduced as part of the UK meeting legally bound targets, which it is at risk of breaching - adding that the Government would need to regulate to ensure compliance if the industry scheme is not implemented.

• UAN

With mostly mild, albeit damp, conditions forecast through to the end of the month, second applications of nitrogen or nitrogen sulphur continue across cereal crops where conditions allow. Those growers looking ahead to maize establishment have a wide range of NP and NPK starter grades available to them, for timely delivery.

Following the announcement from DEFRA referenced above; all applications of UAN material from 1^st April 2024 will require the inclusion of an inhibitor, such as BASF's Limus Clear (soon to be rebranded as Limus Perform). The benefits include an improved nitrogen use efficiency (NUE) of up to 7% through reducing ammonia emissions by up to 98%. Please speak to your Frontier representative for advice and information.

• PKs

Phosphate and potash markets continue to be stable in the UK. There is very little domestic activity given price changes are likely to happen with improved exchange rates and more attractive replacement levels. Delays on some imports due to last minute international buying continue to hamper deliveries with phosphates into some regions, therefore planning will be key for products required in the next five weeks.

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.