Frontrunner - 30th November 2018



  • Security of supply in December

Domestic wheat markets remain focused on securing short term supply through December as logistics have become a constraint for this period. This has created a short term demand, however post Christmas where consumer cover remains ample and Farmers return from the break are likely to find a well supplied and subdued market

  • Stats point to overweight markets

The market has seen the first official supply and demand estimate from the AHDB. Key points show that the reduced bio-fuel demand and the crop production over 14 million shows a healthy exportable surplus, this has been contributed to by higher feed wheat and corn imports early in the season. This is an important first milestone as the UK export pace has been minimal at only 18% of the suggested surplus output using the current AHDB estimate. For further exports the UK price will need to adjust lower to become more competitive.


  • Feed barley trade nearly stalled

There has been little excitement this week in feed barley. There have been a few pre-Christmas sellers with buyers trying to tidy up their books before the holidays. Even at prices close to wheat, it does not look like barley's place in the domestic ration is going to shrink much. Fewer dried distiller's pellets from the UK ethanol plants (that are now shut or are shutting) and the high inclusion of maize means barley is still in some demand. International business has been limited and is all about execution of existing contracts.

  • Southern Hemisphere harvest well under way

The Australian barley harvest is around 65% complete, with yields described "as poor as expected in the east" and "below average but could be worse in the west". Crop sizes range from 6.9 to 7.9 tonnes. Farmers in the east are looking to make the most of their own limited storage before feeding the rest of the supply chain. In Argentina, the harvest is around 30% done with quality and yields around average. Prices have come under a little pressure now the combines are at full steam but overall the world supply and demand on barley is still tight.

  • Malting activity still mostly about execution

Execution of English cargoes continue at a good pace and the talk has now turned to those relying on the Rhine, Mosel and Main river systems for transport, as they may have to wait until late January for any better water depth to return. These rivers are mainly fed from the mountains and, as rain largely falls as snow in the winter the short term prognosis is for the current level of logistical difficulty to continue. Price-wise, our domestic market is paying a premium generally over the port prices, as short looks to cover old sales and maltsters increase their % cover to seasonal norms.


  • Flat prices this week

Prices look set to close the week broadly unchanged, with a rising European market counter balanced by a firmer sterling. Global markets are likely to drift lower so long as the trade dispute between the US and China remains unresolved. However, in recent weeks there are fears that the slowdown in the world's major economies is starting to affect energy prices, which in turn will have a negative impact on vegetable oil markets. The EU continues to see competitively priced imports arriving from the Black Sea and Western Australian new crop is expected to be seen in ports from next month.

  • Concerns over EU new crop production

Early forecasts for a reduction in the 2019 European crop is one possible source of price support as we move through the new crop growing season. Dry conditions in many parts of Europe in this year's late summer have led to reduced sowings in France, Germany and Romania, as well as here in the UK.


  • Demand to return in the new year

Old crop bean markets have now ground to a halt as there are no offers in the market and, despite a few buyers looking to buy February and March, they will have to wait until more supplies come from farm sellers. Demand for human consumption beans has also fallen as the export window to Sudan by mid January is getting filled and, with a lot of Lithuanian beans already in Egypt, there is very limited demand for further tonnage for the next two months.

We expect demand for both feed and human consumption beans to return in the new year. In the meantime, new crop buyers are emerging with new crop feed beans now valued at £20/tonne over November 2019 wheat futures.


  • Nitrogen

CF Fertilisers withdrew terms this week for January deliveries. Focus is on February only and with limited availability of NS / NPK grades. Growers that have a requirement for NS grades should look at this in the next week as UK-produced product is very tight.

India has now confirmed the tender for supply of 1.8 million tonnes of urea for delivery by early January 2019. This purchase will take approx 50% of the current world stocks, plus they could also come back for another tender of 500,000 tonnes during December. This Indian purchase has had little impact on the UK prices and values remain below replacement levels as suppliers look to clear some stocks to make room for other raw materials. It's very unlikely anyone will look to buy new shipments of urea into the UK as usage is so close.

The EU has also announced a reduction in the anti-dumping duty that's been in place on Russian-produced ammonium nitrate by €15 (or by a third). Russian production costs are lower mainly due to gas prices being only a quarter of the price we pay in Europe. The UK could see Russian product come in very soon, however, the discount due to the reduction in anti-dumping duty might not be that attractive in comparison to current suppliers.

  • TSP / MOP

The MOP price increase is slowly coming into the market as stocks reduce and replacement product is arriving from Spain, Germany and Canada. TSP is now looking as if it will also rise, mainly due to exchange rates (£/$). These raw material increases and changes in exchange rates will affect PKs and NPKs going forward. Please keep talking with your Frontier contact on requirements in the spring.

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