Frontrunner - 28th April 2023

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WHEAT

• Canada upbeat on 2023 wheat potential

This week, Canada's national statistical office, Statistics Canada (StatsCan), published its first look at 2023 Canadian crop potential and farmer planting intentions. Canadian farmers are set to increase their wheat area by around 6% on last year, to 27 million acres. If realised, this would be the largest drilled area since 2001. This potential boost to global supplies exceeded trade expectations and added to the market price negativity.

Canada is one of the world's largest wheat producers and is expected to ship about 25 million tonnes this season. This makes it the world's fourth largest wheat exporter after Australia, the EU and Russia. Canada's 2022 crop reached 33.8 million tonnes, bouncing back from its drought-driven, disastrous crop the previous year. Prolonged heat and dryness through the spring and early summer ravaged crops and saw the country's wheat production plunge to just 15.12 million tonnes.

An area of 27 million acres gives the potential for 36 million tonnes in 2023, but the farmer survey was conducted at the beginning of 2023 when market prices were notably higher than they are currently. In contrast to 2021, prolonged cold wet conditions have delayed the start of drilling so far, but weather is expected to improve next week.

The news isn't all positive for 2023 production prospects. Information and analytical agency, APK-Inform, has reported that Ukraine's wheat crop will fall to 16.2 million tonnes and wheat exports will fall 37% to 8.8 million tonnes. A United States Department of Agriculture (USDA) attaché based in Australia has also reported that the country's wheat production will drop to 29 million tonnes for 2023-2024. This compares to Australia's record 39.2 million tonnes in 2022-2023 and 36.2 million tonnes in 2021-2022.

• Wheat prices continue to fall

World wheat markets have had a disappointing week with prices dropping each day, taking losses to approximately 7% since the end of the previous week. Chicago Board of Trade (CBOT) wheat futures dropped to the lowest since March 2021, with active sellers in speculative funds extending their short position in this market to over 130,000 contracts, the equivalent of over 16 million tonnes. The combined short in international wheat futures markets is estimated to be close to record levels.

Despite the uncertainty over the renewal of the Black Sea export corridor from the 18^th of May, the build-up of old crop wheat stocks, which has created an ample supply, is the key driver for the lower prices. The European Commission increased its EU year end wheat stock estimate to 19.6 million tonnes from its previous estimate of 18.1 million tonnes. The bulk of this sits in eastern EU countries where Ukrainian supplies have boosted stocks. Some of these countries have introduced a ban on exports from Ukraine due to the negative impact on their local wheat prices, but the EU parliament voted to extend its Ukraine free trade agreement until June 2024. This needs to be agreed by all member states and might be in question if some countries continue to demand a Ukrainian import ban for the foreseeable future.

An increase in US grain stock estimates is also likely. With newly harvested Brazilian corn supplies imminent, China has cancelled 233,000 tonnes of its US corn purchases which added to the US market negativity. Weekly US corn export sales were at a 15-week low at just 400,000 tonnes. Wheat was equally as disappointing - 155,700 tonnes down, 40% on last week.

• Rain in the plains

BARLEY

• Old crop feed barley

Old crop feed barley values have come under pressure this week. However, they have not followed wheat on a one-for-one basis. Although fresh domestic demand is hard to find, merchant shorts remain active looking to cover historic sales to both the port and domestic compounders.

• Severe weather conditions in Spain

There are concerns about the Spanish barley crop due to a prolonged dry period and temperatures reaching 40°C in parts of the South. Independent grain market analysts, Stratégie Grains, forecasted a 2023 Spanish barley crop of five million tonnes this week. This compares to the 6.6-million-tonnes figure from last year. This may be reduced further unless rain arrives soon.

• Malting barley

It has been a quiet week in the malting barley market. Old crop malting barley values have decreased and demand is now extremely limited, with significant volumes of malting barley still unsold on farm. New crop malting barley remains illiquid, with farmers generally reluctant to sell forward despite healthy premiums and the fact UK malting barley premiums are significantly higher than Scandinavian values.

• Crop 2023

OILSEED RAPE

• Weak oil complex feature of this week's markets

This week, rapeseed values continued to decrease as a weaker oil complex pressured vegetable oil markets lower. At the time of writing, crude oil prices have lost 5% of their value on the week. This combined with slow demand for biofuel and for vegetable oil in food markets has led to further deterioration of oilseed prices. In addition to this, vegetable oil supplies are already heavy in the EU, with reports suggesting that some buyers may have over-bought and are now looking to sell back their oil to crushers or refiners.

Data from the EU shows slower than expected rapeseed imports for the month of March. Markets initially reacted positively to this news however, with the realisation of ample stocks the market continued its path lower.

 PULSES

Old crop beans have certainly not followed the trend of falling values as seen by other commodities over the past week. Feed bean prices have risen by £10/t in most regions, as the volume of ex farm bean buying has really dried up and shorts look to cover spot positions.

We have also seen some much higher values trading into feed compounders in the west of the country. The next market moves will be determined by how competitive beans look when compared to other mid-range protein products, such as rapeseed meal, which have all lost value over the past week. Pulses market volatility is not going away in the short-term.

 FERTILISER

• Urea/AN

UK ammonium nitrate terms were revised this week and reduced by approximately £25/t to reflect lower production costs. This hasn't significantly increased any farm buying as yet, although there are growers still to purchase additional and final tonnes.

Granular urea has been steady after last week's slight increase in price for new season product, but spot movement prices remain stable due to suppliers wanting to sell any remaining stocks before new season. However, it is quite late in the season to be applying straight granular urea to crops and we always recommend using an inhibited urea source (such as Sustain) to prevent losses to the atmosphere as the weather starts to improve at this time of year.

Offers for nitrogen sulphur grades and imported ammonium nitrate are now in the UK market for forward delivery months. The continued fall in price of gas and ammonia may mean that values have not yet reached their lowest for new season purchases, as the weather warms up and the country's gas consumption falls. France has seen a new season re-set in its prices for domestic product this week, but we have yet to see this in the UK for home-produced ammonium nitrate.

Liquid

With two bank holiday weekends fast approaching, growers are encouraged to fill on-farm storage when tanks have the capacity to avoid delay. UK urea ammonium nitrate suppliers continue to monitor the nitrogen market. Growers with additional requirements for urea ammonium nitrate have access to a full range of nitrogen and nitrogen sulphur products at competitive rates for prompt delivery.

PKs