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Frontrunner - 2nd May 2024

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LISTEN TO FRONTRUNNER

Frontrunner is also available as a podcast, so you can hear the latest from our traders while you're on the go. Listen below or subscribe to the report on Acast, Spotify, Apple Podcasts and Google Podcasts. The report this week is read by farm trader, Lucinda Redgate. 


WHEAT

  • Rain dampens markets

Last week, speculative fund short covering took UK wheat futures to their highest levels in 2024 so far. Prolonged dryness and temperatures in the high 20s across much of southern Russia and east Ukraine were the primary price drivers.

However, cooler temperatures and rain over the weekend means buyers have taken a step back and sellers are keen to take advantage of these attractive prices – this has taken markets lower again.

The severe Russian drought seen in 2010 may not be repeated to the same extent, but threats to yields in the region cannot be ruled out and whilst speculative funds still carry large short positions, the market remains vulnerable to future price spikes. Additionally, increased attacks on the Port of Odesa highlight the potential threat to Black Sea wheat supplies, although shipments to date remain robust.

Ukraine's grain export pace reached 40.7 million tonnes, just behind 41.4mmt last year. This includes 15.6 million tonnes of wheat and in April alone Ukraine has shipped 5.7 million tonnes of grain.

In April, Russian wheat exports reached 4.6 million tonnes which compares to 4.8 million tonnes in the previous month, highlighting the dominant bearish old crop price driver which remains in play.

  • Encouraging US crop progress weighs

Promising US wheat and corn crop progress added some weight to the market negativity this week.

There was just a one point slip for winter wheat condition to 49% rated 'good/excellent' but this still compares well to last year when just 28% met this grade. The area of winter wheat in drought has expanded in the western plains where rain failed to reach, despite good rainfall for much of the other cropped areas.

Spring wheat drilling has progressed well, up to 34% planted versus 15% last week – this is also well ahead of trade guesses of 27%. Despite adverse heavy rain, corn planting advanced well to 27% complete, an increase from 12% last week and the 22% average.

Whether or not US farmers expand their corn area given the good drilling pace remains to be seen. Earlier this year, the United States Department of Agriculture (USDA) conducted its survey for farmer planting intentions for the likely corn area which was pinned at just over 90 million acres - well below last year's figure of 94.6 million acres.

  • Something to hide?

This week Brussels failed to provide trade data again, leaving it increasingly difficult to assess the recent success or otherwise for EU wheat shipments.

The pace this season has been well behind last season but the gap in recent weeks has been closing. Private estimates already had the total for the current season ahead of last year but with no official updates for three weeks, the market is blind to the official data and therefore unable to react appropriately. A faster pace would provide support for EU prices, particularly with production issues for the western EU countries.

New crop EU wheat sales may prove challenging, with analysts seeing Russian prices around $25-$30 below French values. However, with a crop five million tonnes smaller and a greater import need next season, North Africa exporters may not need to be too aggressive with their pricing. If Southern Russia wheat yield issues prove significant from the heat and dryness seen in recent weeks, current cheap offers may prove short lived.


BARLEY

  • Farmer selling of old crop and new crop feed barley picks up

New crop prices have achieved some trigger values and some risk has been managed, locking in a percentage of anticipated production.

Feed barley is trading at an £18-£22/t discount to feed wheat in most parts of the UK. The UK is currently not export competitive for new crop feed barley at current levels.

With a large percentage of the UK's barley crop being spring sown – some of which is potentially malting varieties - the direction of feed barley will be impacted by the selection rate of these crops.

  • Malting barley market firmed again

There are concerns regarding the delayed sowing of spring barley in three key areas of the European malting barley surplus: UK, France and Scandinavia.

The concerns about the quality of these late sown crops is compounded, as the carryover stocks of malting barley throughout Europe are very low. Therefore, the weather between now and harvest will be critical and will be the main driver for malting barley values – this will all be closely watched by the trade.

Despite later than optimal UK drilling dates, the UK still has a sizable spring barley crop and, even a relatively modest selection rate would satisfy demand.


OILSEED RAPE

  • Rapeseed prices held their ground

This week, focus turns to new crop growing conditions in Europe which haven't been favourable in recent weeks during the flowering stage of the growing cycle.

As crushers complete their cover for the period, old crop values are beginning to diminish in comparison to new crop values, although will continue to follow wider trends to an extent.

Wet weather is currently causing delays to corn plantings and this normally means the soybean area will increase. On top of this, biodiesel demand in the US is stagnating which could create some further pressure in that market.

In another competing market, palm oil is also trading lower after an extended period of relative expensiveness. Weather and crop conditions globally are now the key focus for traders.


 FERTILISER

  • Urea/AN

Over the last two weeks many of you have made decisions on final nitrogen balances based on crop potential or known crop requirement, therefore, UK nitrogen purchasing has increased.

This will have potentially stalled any thought for an earlier new season ammonium nitrate offer and the likelihood of a later EU/UK new season release date seems more probable because ammonia still remains high globally.

Importers are looking at moving existing urea stocks from sheds due to many fertiliser programmes being completed. The release of these stocks is also due to the fact that we've seen the first signals of offers on new season urea. These are all based on future delivery options and not for spot movement.

There are only a few urea traders currently offering into the UK market and it appears others remain out because the urea market is likely to weaken further.

  • Liquid/UAN

This week there aren't any market changes in liquid fertiliser to report. However, call offs for existing liquid orders are progressing well with prompt deliveries to farm.

In addition, it seems liquid inputs are the same as solid - orders are increasing as crop confidence or crop potential improves.

As potato planting progresses and maize planting begins in some regions, the liquid manufacturers continue to see a switch across to precision nutrition with liquid N, P and/or K solutions.

  • Straights/NPKs

Another week of no change in the PK straights market. However, big buyers will have their eye on what the TSP/DAP market does over the coming months. This is because prices will likely weaken due to TSP supply versus demand and as ammonia value decreases, so will DAP.

Linked to the straight PKs is the solid NPK market. If you're looking for NPK compounds, bear in mind supplies have been limited this season and you may have to consider alternatives.


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.

To be notified each time this report is published in the future, you can also subscribe at www.frontierag.co.uk/blog/subscribe to ensure you always have the latest market insights.


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