Frontrunner - 29th April 2022

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WHEAT

  • Ukraine war continues to drive markets higher

There are new contract highs for 2022 European new crop wheat futures this week, as markets continue to react to the longer-term threats to Black Sea wheat supplies - particularly those from Ukraine. The London November 2022 contract passed £300/t for the first time and the old crop May 2022 contract set a new record with a high of £332.20/t.

The Ukraine agriculture minister reported spring grain planting progress had reached 3.6 million hectares. This is about a quarter of the total forecast to be planted due to farmers facing fuel shortages and dealing with damage from the conflict. Nonetheless, analyst APK-Inform are upbeat about Ukraine 2022 crop production and exports. It sees the potential for a grain crop of 41.4 million tonnes, including almost 17 million tonnes of wheat compared to 33 million tonnes in 2021, and 18.5 million tonnes of corn compared to 42 million in 2021. The analyst raised its grain export forecast to 33.2 million tonnes from previous estimates of 29.9 million tonnes. However, how this will be reached remains to be seen given Russia's intention to seize all of Ukraine's export facilities coupled with the country's already destroyed infrastructure, including the railways. Ukraine did reach agreement with Bulgaria to ship grains through its Black Sea port of Varna.

The EU is seen as the next best alternative to Black Sea wheat for the major wheat importers and this is driving European wheat futures higher.

  • US crop potential in doubt

The US winter wheat crop condition proved worse than trader expectations when published on Monday, adding weight to the subsequent futures price rises. The persistent dry conditions leave just 27% of the crop as good/excellent - the worst the crop has been at this time of year since 1989.

Slow spring wheat and corn planting took US spring wheat futures to new contract highs and took Chicago Board of Trade (CBOT) corn futures to within 20 cents of the all-time record high that was set in 2012. Spring wheat planting advanced by five points to 13%; this is well behind the 27% last year. Planting for corn increased by just three points to 7%, compared to the 15% average. Snow, rain and cold weather has caused a slow planting pace for spring crops, although weather conditions are set to improve and much of the dry west should see rain in the coming days.

StatsCan tempered some of the bullish sentiment with some upbeat wheat planting intentions for Canadian farmers. It sees the 2022 all-wheat planted area up 7.2% on 2021 to a total of 25.05 million acres. Farmers, however, were surveyed several weeks ago and the current cold and snow in many areas may well impact their ability to meet these expectations.

  • No new records for the Southern Hemisphere

Wheat production estimates next season for the Southern Hemisphere suggest it will not have the firepower it had this season.

Challenges with high fuel and fertiliser costs are likely to see a smaller planted wheat area in Argentina for 2022-2023. Production is seen falling to 18.6 million tonnes, down from its record 21.9 million tonnes this season. With a smaller surplus, exports are estimated lower at 12.6 million tonnes which compares to 15.3 million tonnes this season. Fellow Southern Hemisphere major wheat producer Australia is also expected to have a lower wheat output than this season's record of 36.3 million tonnes. Production is seen falling to 29 million tonnes leaving the surplus available to ship at 22 million tonnes, down from the expected 27.5 million tonnes this season.


BARLEY

  • Feed barley

Feed barley values have firmed on the week for both old and new crop, however, traded volumes have been limited. Old crop barley is starting to feel close to being sold in certain areas of the UK, but at the same time most consumers look to be well covered with feed barley requirements.

  • Old crop malting barley

Old crop malting barley has been virtually non-discussed this week – traded volumes have been very small with only few loads being purchased by merchant shorts as and when existing parcels have failed due to quality.

  • New crop malting barley

The European malting barley market remains extremely illiquid for new crop. Buying levels keep firming, however, lack of selling from farmers persists. Dry weather in the forecast is doing little to encourage farmer selling. It is noteworthy that the French and Scandinavian farmers have sold a far larger percentage of their 2022 malting barley crops compared with UK farmers. Assuming average yields and average malting barley pass rates, the UK today has the potential for a healthy surplus of malting barley. Subsequently, malting premiums may come under pressure as we approach harvest.


OILSEED RAPE

  • Markets remain firm

In the past few weeks, farm new crop rapeseed prices surged to levels where £700/t has become the benchmark. Clearly the situation in Ukraine has been the key driver, creating a massive hole in the pre-Christmas supply into Europe. Oilseeds markets have also found support from high crush margins, as well as a late season surge in US soybean exports following supply difficulties in South America and the present weather risk to Northern Hemisphere spring plantings.

  • Nervousness on new crop supplies

In recent days, the market has also benefitted from crop data coming out of both Canada and the EU. StatsCan reduced their canola acreage down to 20.9 million hectares which represents a 7.1% drop compared to last year. This news sent Canadian futures prices sharply higher with Friday's close, showing gains for the twelfth straight week in a row. In the meantime, the EU revised its 2022 predicted yield down from 3.22 tonnes per hectare to 3.19 tonnes per hectare, which itself is 0.2% lower than last year. Current prices are based on the expectation of average weather going forward. If this weather isn't optimal and there is no settlement on the political front, then markets are likely to stay firm.

  • US soybean stocks seen tightening

The underlying difficulty in the oilseeds complex is that despite record high prices, the demand for US soybeans - both domestically and on export markets - appears to roll on unaffected. Soybeans are still the major driver in global oilseeds markets despite the most acute shortages currently being felt in the rapeseed and sunflower sectors. With Brazil expected to be almost out of beans by the end of July, a further tightening of the US supply and demand looks inevitable. There is the USDA's planting progress report due out on Monday which will be interesting, but the May 12th report on the global new crop supply and demand for grains and oilseeds could be massive.


 PULSES

  • Increasing markets

As all markets continue to rise due to uncertainty over grain crops in the Northern Hemisphere, we have seen demand increase for old crop beans. This interest is mainly coming from the near continent as beans continue to be relatively well valued compared to other mid-protein feed ingredients. However, with very little supply left in the UK now it is unlikely this demand will be met. We continue to see interest for old crop peas at a discount to beans but again, supplies are now very limited.

  • Little to no trade for new crop

New crop trade is almost non-existent as buyers are not prepared to make forward purchases at such relatively high levels but, more importantly, the lack of rainfall is deterring all growers from making selling decisions right now. The Frontier bean pool for crop 2022 is still open, please contact your local farm trader for further details.


 FERTILISER

  • Urea/AN

This week could be an important week in setting the future global pricing on urea and in turn perhaps giving us an insight into what to expect for new season urea and AN values. India tendered for a small parcel of 78,000 tonnes and offers have come in; China is most likely to be the supplier of this tonnage. We await further tender requests which are expected over the next week. As a result of the tender, trade has softened and North African offers have fallen to $850 FOB, but it could be that this pricing value may stick around for a few weeks yet.

On the other hand, European gas pricing increased markedly on the back of Russia cutting gas off to Poland and Bulgaria. These countries tend to be small markets but if Russia's current threats to Germany and Italy also come to fruition, this is more likely to have a significant impact on gas pricing on the continent. Yesterday's values climbed from 91 euros to 107 euros, settling at 100 euros/MWh.

Russia has also extended its export restrictions from 31st May until 31st August. This may not necessarily have huge implications in the short term but there's no doubt it will tighten supplies in what is usually a busy period for new season purchasing by farmers across the globe.

One to watch will be the trade of sulphuric acid. Values have shot up dramatically on short supply, freight and energy costs of production. This will filter through for new season nitrogen sulphur products.

In the UK, imported domestic AN values have come down slightly but certainly not at a level that would see tonnage being booked for 2022/2023.

  • UAN

Liquid offers remain for the current season, however, pricing continues on a POA basis. Given the current dry, warm conditions it would be sensible to include Limus® Clear, the BASF urease inhibitor, in all UAN applications to reduce ammonia losses so more nitrogen is available to your crops. Please speak to your Frontier contact for further advice and information.

  • PKS/straights

Phosphates remain stable and continue to firm, and certainly show no sign of dropping in the short term. DAP, which generally is the benchmark, set new pricing records this week when global demand is at its lowest. Potash also continues to remain firm, driven very much by an insatiable demand from South America and of course the sanctions imposed on Russia and Belarus. Latest quotes indicate 900 euros cost, insurance and freight (CIF) bulk into UK. This would indicate some steep price increases to come on replacement product. Potassium is very much a yield builder and in a year that may see a smaller nitrogen market MOP, and MOP based products will be in high demand.


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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