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.
- Markets crash lower having set new contract highs
Wheat and corn futures continued to drive higher earlier this week, setting new contract highs. US markets reached their highest level for eight years and Chicago Board of Trade (CBOT) corn futures pushed above $7/bu – a level double their contract low. New crop London wheat futures at their highest had risen over this month by an impressive £35/t. Higher European futures markets reflected concerns for both winter and spring crops following the prolonged period of dry weather and, in places, record low April temperatures impacting on most of northern Europe. However, with strong speculative buying, futures markets had become technically overbought and were overdue a correction. Forecasts for much needed rain seemed to be the trigger for a wave of profit-taking which drove markets sharply lower during the second half of the week. Upbeat wheat production prospects for Romania were another negative element. Romania's enthusiasm to sell new crop wheat was highlighted in the tender held by Egypt this week. Offers from Romania were the cheapest made at $10/t below Egypt's largest supplier, Russia. The prices were still more than $30/t above the previous purchases Egypt made from Russia before the April price rally, leading it to cancel this week's tender.
- Brazilian corn in trouble
Dry weather persisting across many of the corn growing regions in Brazil has been damaging to crops, causing increasing concern for yields and production prospects. Paraná is the second largest corn producing state in Brazil and the condition of the crop there is deteriorating sharply. Only 40% of the crop is now rated 'good', down from 62% last week and 92% the first week of this month. In the April World Agricultural Supply and Demand Estimates (WASDE) report from the United States Department of Agriculture (USDA), the corn estimate for Brazil was unchanged at 109 million tonnes, but many analysts see that falling by at least 10 million tonnes. This would push additional export demand to the US which has already sold its surplus from the current season and is one of the primary price drivers for soaring CBOT corn futures.
- Leading wheat exporters cut their 2021 production prospects
Statistics Canada (StatCan) predicts Canadian farmers will plant notably less wheat this spring, choosing instead to increase their canola and barley cropping. It expects a fall of 6.9% in the drilled wheat area, down from 25 million acres in 2020 to 23.3 million acres in 2021. Meanwhile, the European Commission cut its estimated soft wheat production estimate for the EU-27 by almost two million tonnes from the previous estimate, down to 124.8 million tonnes. This is almost five million tonnes below April estimates from Stratégie grains. The EU, including the UK, and Canada are second and third respectively behind Russia in the world table of leading wheat exporters, narrowly beating the US which is in fourth place. Meanwhile, supply and demand projections from the International Grains Council (IGC) released this week left world production for 2021/22 unchanged on last month at 790 million tonnes. This compares with 774 million tonnes this season.
- Structured new crop barley prices
New crop feed barley prices have swung in a large range this week following the volatility in the global grains complex. Many growers have looked to take advantage of this opportunity by locking in both feed barley and malting barley base prices at attractive levels. Today, UK barley is not competitive on the export market. Therefore, the new crop barley prices are structured around discounts to wheat.
- Malting barley markets constricted due to pace of feed barley
Malting barley markets have been slim this week, and malting premiums in Europe have been constricted as malting barley prices did not lift at pace of feed barley. Scandinavia received useful rainfall on Thursday which will help their spring malting barley crop. Concerns about lack of moisture in the UK also look set to be relieved if the forecast rain for the bank holiday weekend materialises. Uncertainties regarding malting barley demand due to the pandemic remain in place. However, for now at least, there is some positivity in the UK as pubs open and the on trade demand will increase.
- Premium contracts for winter and spring malting barley are available at Frontier
Frontier continues to offer a range of guaranteed minimum premium contracts for both winter and spring malting barley. These schemes are a flexible risk management tool that, while protecting the malting premium, also give growers the flexibility to hedge their feed barley base price at a time of their choosing. These schemes are also a low risk option, as growers do not need to worry about selling fixed price malting barley, and subsequently not producing the correct quality. For more details about malting barley marketing options available in your area please speak to your local farm trader.
- Prices peak
In a volatile week of trading, domestic rapeseed prices look set to end the week almost unchanged, having peaked at levels £10/t higher on Monday. US soybean futures also hit season highs on Monday at levels not seen since 2013, but have subsequently traded down by 2.5%. As US beans have been in a bull run for over a year with values up almost 65%, an occasional pull back in prices is to be expected. However, when this happens, it can lead traders to believe the market is beginning to move towards lower levels.
- Increased optimism for US soybean supply
Recent softness in markets has been attributed to reports of various commodities, including soybeans, being traded into the east coast of America, forecast rain for the Midwest and an update from an international trader which put US spring plantings for beans and corn five million acres up on predictions from the USDA last month. The last factor could make a significant difference to US stocks at the end of 2021/22 and, when considered alongside recent reports of China cancelling nearby Brazilian soybean orders. It is no surprise that these factors have led the market to weaken slightly.
- Global oilseeds stocks set to increase in 2021/22
Traders have taken note of the first 2021/22 forecasts for global oilseeds markets from the analysts Oil World, which predicts global rapeseed production will be up from 64.72 million tonnes this year to 65.60 million tonnes from the next round of harvests. Within this, Oil World anticipates an Australian crop of 4.25 million tonnes – only marginally lower than the one just completed. This is based on a lower yield but sharply higher plantings and, if accomplished, will turn out to be a considerable comfort to Europe's crushers who are heavily dependent on supplies arriving from this source in early 2022. Overall, Oil World is now predicting that 2021/22 will see global production of all oilseeds exceed consumption, with stocks rebuilding. Uncertainties such as the weather could affect this in the coming months, but there are a few factors that buyers can point to in what has been a relentlessly bullish market run.
- Unpredictable markets and concerns over the growing pulse crop
It has been another week of volatility in world markets this week. Concerns over the growing pulse crop have resulted in minimal trade despite values rising and falling as much as £10/t over the past week. Most winter bean crops are in very good condition, although they would benefit from at least 20mm of rain and warmer conditions. Many are still very short and early crops are just about to start flowering. Most spring sown crops have germinated and are showing through in the row, but rain and warmth is needed soon to avoid any significant yield penalty.
With unstable markets, there is unlikely to be much pulse volume traded throughout Europe until significant crop growth is seen.
- AN / urea
Urea has now dropped by $60/t from the season high but, as we head closer towards 'new season', prices are still approximately $100/t more than this time last year. India has issued a tender for up to 1.8 million tonnes for May shipment which will hold up prices. However, due to the current restrictions in the region due to Covid-19, it is possible ports will be closed; therefore, this tender will not happen or the tonnage will be reduced.
UK produced nitrogen prices remain the same, although imported levels have dropped back slightly. Stocks of imported products are low with availability limited to some UK ports.
Phosphate levels are unchanged and remain firm with continued demand from South America. Stocks in the UK are disappearing with little interest in physical replacement product until levels come down.
Potash suppliers have announced an intention to increase prices by €8-10/t as we move into the new month. Given the rise there has been on other straights, it is possible this rise will stick.
Get in touch