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Frontrunner - 24th September 2021

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WHEAT

  • Wheat prices rise

London wheat futures prices gained 3.5% from their low on Monday and came within £4/t of the contract high which was achieved in the middle of August. Following higher world market prices, there seemed no clear catalyst for the sharp price rise, but the latest export data from the EU and US was supportive.

Last week, analyst group Stratégie Grains cut its EU wheat export availability estimate by 1.7 million tonnes down to a new estimate of 31 million tonnes. This is as a result of a lower EU wheat production estimate; Stratégie Grains has reduced this figure by 2.4 million tonnes to a new estimate of 129.1 million tonnes. The latest EU export data shows that over 6.5 million tonnes has now been shipped this season, which is two million tonnes ahead of this time last season. It is thought delays to data-gathering leave the amount actually shipped underestimated by as much as one million tonnes and, if this is the case, this is a pace which is not sustainable. Last week's US wheat shipments were at the top end of expectations at over 563,000 tonnes and the cumulative total shipped reached over 7.7 million tonnes. This is approximately one million tonnes below last season's pace; however, the US has had significantly less available to ship. The wheat export estimate from the United States Department of Agriculture (USDA) is 23.81 million tonnes, which is about three million tonnes less than last season.

Speculative wheat futures buyers were also encouraged by rumours of China buying both French and US wheat supplies; however, no evidence to support this expectation has been forthcoming.

  • IGC see increasing corn supplies

The International Grains Council (IGC) played catch up with the USDA in its September estimates, increasing its world corn output estimate by seven million tonnes to a record 1.209-billion-tonne prediction with production increases seen for the US and Ukraine. The IGC is closely aligned with the USDA on the US corn crop with its estimate at 380.3 million tonnes compared to the USDA's prediction of 380.9 million tonnes. World stock estimates are at 282 million tonnes, up 12 million tonnes on previous estimates and up eight million tonnes on the year. The IGC world wheat balance sheet had minor changes, with lower output seen for the EU and Canada which was offset by increased estimates for Australia and Ukraine. Overall world production was seen down one million tonnes on the previous estimate at a new total of 781 million tonnes. Stocks slipped one million tonnes on the previous estimate at a new total of 277 million tonnes and are now two million tonnes down on the year.

  • China buying Australian wheat

In contrast to rumours of China buying US and French wheat, this week it is reported that Australia has been an active seller of wheat to China from what is anticipated to be its second consecutive bumper wheat crop, which begins harvest towards the end of the year. Australian farmers have reportedly sold five million tonnes of their 2021-22 wheat crop, with almost two million tonnes of that total going to China, despite an ongoing trade war between the two countries. It is also reported that Chinese buyers have actually cancelled poor quality French cargoes in favour of Australian wheat.

  • Rising UK milling premiums

Domestic Group 1 bread-making premiums increased further this week as UK millers sought cover through to the end of the year. High moisture and low specific weights leave unanswered questions over the availability of suitable wheat to meet bread-making specifications and the shortage of bulk freight has added to the difficulty of meeting delivery needs. The prices for alternative imported supplies have also risen significantly. Germany suffered from damaging rainfall which has reduced its available milling quality and there is strong demand for German wheat to replace lost French supplies in export markets. Canadian and US spring wheat crops suffered from prolonged heat and dryness and their production is 35-40% down on the year. Depending on location, UK milling premiums reached levels ranging between £30-38/t above feed prices levels this week; something rarely seen in previous seasons.


BARLEY

  • Feed barley prices strengthen in the UK

UK feed barley values strengthened this week, driven mainly by the rising wheat market. The barley discount to wheat, however, has widened again as the rise in barley values was limited mainly due to the lack of export interest. UK domestic demand continues to be heavier in recent months as end users finally capitulate and reluctantly come to the market. Any hopes of lower prices have vanished for now. Spot feed barley prices in some parts of the country are therefore at a premium to November at this present time. Limited supply from farm as growers' thoughts turn to field work only adds to the upwards pressure on prices.

  • Highest prices for UK barley achievable on south and east ports

Malting barley prices also remain firm as demand for export to mainland Europe sets the tone. A dynamic which sees plenty of buyers and few sellers of export cargoes looks set to keep prices firm for some time. The highest prices for UK barley are therefore achievable to the ports along the south and east coast of the UK. Domestic malting barley buyers are much more relaxed as they all have a reasonable amount of cover but are reluctant to take on more barley at the high prices seen today until they make fresh malt sales.

With UK malting barley now in the barn and all signs indicating that it is of an excellent quality, crop growers should be encouraged to cash in by selling at least some of their production at the high levels seen today if they have not already done so. Taking into consideration the more-than-adequate supplies of good quality barley available within the UK, premiums are holding up well for now. However, when export demand drops off, UK buyers will happily shrink their premiums.


OILSEED RAPE

  • Rapeseed prices firmer again on the week with bearish elements creeping in

As of 23rd September the November MATIF contract gained €18/t, led mainly by increasing oil and energy prices. Interestingly, other oilseeds markets - including US soybeans and Canadian canola - have not followed the same pattern and remain relatively flat on the week. As a result, the EU premium over Canadian canola has increased to around €26/t, which moves values closer to allowing Canadian canola to trade into the EU.

Europe currently maintains a heavy deficit of rapeseed, which will help to support prices throughout the season. However, there are some bearish elements brewing in the market; the news this week of China's Evergrande group up for potential default led world markets to reassess the economic state in the country. This is important for oilseeds markets as, if the Chinese economy takes a downturn, the demand for oilseeds and their by-products could be dramatically reduced. If there should be a fresh outbreak of Covid-19 in the country added to this, demand could be slashed from the world's largest oilseed buyer.

Energy and material shortages are also affecting markets. In China, an energy shortage is reducing crush rates and leaving more seed on the market, whilst closer to home a shortage of a catalyst which aids the conversion of rapeseed oil into biofuel has lowered the utility for the oil and, in turn, limited the price.

The oilseeds market is currently subject to many complex factors both quantifiable and unquantifiable and until we get a clearer picture on global crop sizes and demand levels through the winter, this market will remain volatile. 


 PULSES

  • Spring beans fit for human consumption premium

The bean harvest is still dragging on with many crops of spring beans only just ripening and being ready to combine. The yields still seem to be well above last year with spring crops ranging between 4-5.5t/ha. The quality is also much better than last year with bruchid levels below 10% in many samples, making them suitable for a human consumption premium. This premium market has been slow to develop as demand is limited due to large carryover stocks and the likelihood of another big Australian harvest. Current premiums range from £15-20/t over feed beans depending on quality and location.

Frontier can arrange for collection and testing of sampled beans. Please contact your local Frontier farm trader if you'd like to arrange this service.


 FERTILISER

  • AN/urea

Early on Thursday morning (16th Sept), CF Fertilisers announced that it had halted production at its factories at Ince and Billingham due to the cost of production based on the current gas price. This caused all nitrogen-containing fertiliser offers to be withdrawn from the market by all manufacturers and suppliers within the UK. Subsequently, various other European manufacturers followed with further announcements of production cutbacks.

As of 23rd September, CF Fertilisers recommenced production of Nitram at Billingham, although there is no news on the Ince site. With CF Fertilisers providing 40% of domestic supply and no current Nitram offers, this is likely to leave the market very tight for the rest of the season.

Late on Monday, Yara announced a €65/t increase to the granular Extran price in France. This was followed by new offers of limited allocated volume to the UK market.

Granular urea levels continue to steadily rise on increased gas prices and demand. From the 1st September to today, granular urea offers out of Egypt have risen by over $140/t.

Early this week, India announced a new tender for a significant volume pre- and post-Christmas, which will not dampen the rising urea market. It is thought that China will need to supply the Indian market, but demand levels are currently unknown and there is the possibility of restrictions or rules on exports which could delay future movements.

Haulage remains a huge challenge for the UK agricultural supply industry, but with seed delivery demand starting to reduce this will allow more lorries to become available.

Our advice remains a constant: speak to your Frontier contact for more information and offers.

  • UAN

All UAN terms were withdrawn by domestic suppliers last Thursday. Some new offers have now emerged into the market with a very limited volume at numbers reflecting the higher gas price and anticipated haulage rate increase going forward.

Tank fill business is largely covered. However, there remains significant volumes to be covered in the spring period. Offers on available tonnage remain tight, which is likely to be the case for the remainder of the current season.

  • PKs

MOP and TSP offers remain limited with a continued theme of supply pressure and higher replacement costs, with the most recent UK offers up a further £15-20/t. This is bringing the UK market more in line with the rest of Europe.

Any grower that has a requirement for phosphorous or potassium for crop 2022 should consider looking at their fertiliser inputs sooner rather than later.


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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