Frontrunner - 25th January 2024

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WHEAT

• Domestic wheat prices lower again

This week UK wheat futures have fallen to new contract lows despite support for US and European wheat markets.

UK feed wheat prices remain around £10/t too expensive to compete for export market share. Traditional UK feed wheat EU export destinations, such as Spain and Ireland, continue to find cheaper offers from other origins and there is no shortage of sales opportunity should prices become competitive.

The EU has so far imported 5.4 million tonnes of wheat - 3.65 million tonnes of that has come from Ukraine. UK exports remain stagnant at less than 130,000 tonnes shipped for the first half of the season, signalling a potential carryover of over three million tonnes of stock into next season.

Domestic demand in the feed and ethanol sectors has been less than expected and with no exports, UK feed wheat prices are likely to keep falling. The opportunity to carry into next season is increasingly attractive, with the carry from London May 2024 to November 2024 futures up to £15/t.

• Uncertainty over 2024

Looking ahead, the 2024-25 season has mounting questions over wheat supply in various quarters.

We're familiar with the reduced UK winter wheat planting because of a wet autumn and a similar issue is evident for France and Germany.

There is also growing uncertainty for the potential of US wheat-drilled areas. Capital market company, S & P Global, said all US wheat planting would be down to 47.225 million acres which compares to the 49.6 million acres for 2023-24. S&P Global also see a decline for US corn planting next season at 93 million acres - down from 94.6 million acres in 2023-24.

There is, however, no shortage of US corn given the country's successful 2023 harvest. US year end corn stocks will be over 20 million tonnes higher than the start of the season at a total of almost 55 million tonnes – this is enough to meet a third of the US annual animal feed demand.

• More encouraging US and EU wheat exports

Russian wheat export volumes have slipped below the weekly record during the first half of the season but US and EU fortunes are more encouraging. Falling prices have presented a more competitive offer from US and EU exporters, whilst Russian shipping has been hampered by stormy winter weather. Last week, Russia shipped 650,000 tonnes of grain which was down 13% from the previous week.

The latest EU weekly wheat export numbers from Brussels to 19th January increased by 477,000 tonnes to a total of 17.358 million tonnes so far this season. This is still behind last season at this same stage, which was 18.79 million tonnes. The data is said to be incomplete, but given recent business it would seem likely that the Stratégie Grains seasons export estimate of 31.7 million tonnes is achievable - even if the United States Department of Agriculture's (USDA) estimate of 36.6 million tonnes isn't.

Last week's US weekly wheat export sales proved to be over 200,000 tonnes ahead of the highest trade estimates at 708,000 tonnes. This takes the seasons total to 16.1 million tonnes, 4% ahead of last year. Just 18% of the US export estimate remains unsold.

In contrast to UK wheat futures, Chicago Board of Trade (CBOT) wheat managed to make five modest consecutive higher closes through to Wednesday.

BARLEY

• Prices continue to fall as surplus weighs on UK

Old crop feed barley prices continue last week's declines and have followed wheat markets lower this week, losing just over 1%.

This decrease has preserved the historically wide barley discount to wheat, meaning barley will remain competitive in feed formulations. The farm supply that has come forward this week has predominantly been from Lincolnshire, Yorkshire and the Midlands.

Compounder demand has reappeared this week, particularly evident in the pre-harvest positions. Domestic demand, however, is struggling to abate price declines in the face of a potentially sizable surplus of feed barley still in the country due to the lack of UK export pace.

• New crop production remains uncertain

New crop feed barley generally remains at attractive discounts to wheat. With less area planted year on year and the current crop conditions being worse than last year, the next few weeks will be key for assessing potential yields. Conversely, planned malting barley areas have increased for crop '24, though exact figures can only be assessed once planting is underway.

OILSEED RAPE

• Rapeseed values appreciate as crushers look to take more cover

Rapeseed values saw a substantial increase over the last two weeks as European crushers looked to take further cover - increasing prices to a point that triggered some farm selling. In the UK, this level was around £350-£360/t ex-farm. The Australian grower has also been resistant to selling at these current prices and is behind the typical selling patterns. Delays in passage time through the Red Sea is also creating a nearby demand.

Outside of rapeseed, other oilseeds markets are offering little support. South American soybean production ideas are seemingly improving and demand into the US biofuel sector is slightly under expectations, which has caused a gradual slide in soybean values. 

 PULSES

Very little change in old crop bean markets this week. There is no doubt we will some more demand from UK compounders but at current levels, beans do not feature in dairy or pig rations.

Values are expected to fall to be more aligned with potential exportable bean cargos and other mid-range proteins.

As ever, the unknown is what the size of the 2023 bean harvest will be and how much has been sold to date. It appears that initial yield expectations were overstated but growers have sold a similar percentage. Until we see some more buying interest, values will continue to slip further. 

 FERTILISER

• Urea/AN

UK demand for nitrates continues to steadily increase as growers realise the varied crop conditions. This, along with the excess winter rainfall, has led to a review of nitrogen and nitrogen sulphur requirements because the potential levels of available nitrogen in soils could be very low.

Global urea markets are progressively ticking up in value as buyers return from around the world, including the UK and Europe. Volumes committed by Egyptian and Middle Eastern producers in the past week suggest the countries don't have much spare capacity (if any) for new sales until March. With India and other large consuming countries still requiring product, prices are likely to remain firm.

Urea offers to UK growers continue to be mixed and generally don't yet fully reflect the price gains witnessed internationally over the past week but these are likely to be introduced very soon.

Ammonium nitrate production in most of Europe remains subdued following a long period of low demand. Many facilities continue to be offline, which is having a knock-on effect on physical availability for February and March which is when demand returns.

However, UK production from CF Fertilisers has continued. Its latest offer for March/April delivery was well-accepted and remains competitive against any imported options, including urea.

Ammonium nitrate is set to be tight in supply over the next 60 to 90 days and with CF Fertilisers only able to offer what it can produce each month, it's worth discussing your April requirements whilst quality domestic product is available.

• Liquid

As mentioned, we're approaching application which means you're likely reviewing crop requirements for the coming season.

If you have additional volumes to purchase you should discuss the full portfolio of grades on offer from Frontier, whether this be additional nitrogen or nitrogen sulphur for main dressings or an NPK product for establishing spring cereals or root crops. Those with tank capacity should look to fill on-farm storage ahead of the spring season.

• PKs

Supplies into the UK are hand to mouth in order to capture international weakness in prices, which look to have levelled out.

MOP values have dropped back to more traditionally accepted numbers and with that demand has increased, while DAP and TSP experienced global price reductions that are now reflected in the UK.

Availability issues on raw materials due to increased freight rates and longer journey times avoiding the Red Sea might hamper the supply chain on to farm, so it's wise to secure any outstanding requirements.

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