Frontrunner - 4th February 2022

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WHEAT

  • Wheat prices lower

Following last week's notable volatility, wheat markets started this week making sharp losses and struggled to find any form of recovery. The threat of conflict between Russia and Ukraine remains and, should this be realised, wheat futures prices would rally again. Speculative longs have, however, been encouraged by progress with diplomatic solutions, with many having subsequently taken the exit, bringing futures prices down in the process.

Selling was also encouraged by a large winter storm which brought rain and snow for many of the winter wheat producing states in the US. Crop ratings at the end of January were very poor with drought conditions prevailing, so this latest spell of wet weather should improve production potential. Weekly US crop condition reports will resume in April.

  • Business as usual for Egypt

The threat of significant interruption to trade flows should the Russian-Ukrainian tension escalate remains. However, this hasn't stopped Egypt - the world's largest wheat importer - taking advantage of the cheapest origin, the Black Sea, in its latest tender. The General Authority for Supply Commodities (GASC) confirmed the purchase of 420,000 tonnes of milling wheat for March arrival with three 60,000-tonne cargos from Ukraine, two 60,000-tonne cargos from Russia and two 60,000-tonne cargos from Romania. Prices (including freight) were approximately $13/t below Egypt's last tender on the 29th December. Ukraine is pushing ahead with shipments from its surplus with 17 million tonnes gone from its agreed 24.5-million-tonne quota.

  • EU wheat export pace needs to step up

Brussels has updated its EU wheat export data and finally included French shipments data, which had been missing from previous reports. The data showed that 16.64 million tonnes had been shipped by 30th January. With the French adjustments, Brussels' exports are now seen up one million tonnes on the week and one million tonnes up on the year. However, this only leaves five months to ship the remaining 15-15.5 million tonnes to avoid a burdensome end of season stock and, with fresh trade lacking, is another negative element for markets.

Furthermore, volatile foreign exchange markets are presenting an additional challenge for EU wheat exporters. Throughout January, the euro fell to its lowest against the US dollar since June 2020, which helps EU wheat competitiveness; however, comments from the European Central Bank (ECB) surprised markets yesterday by highlighting unexpected record inflation data and no longer ruling out interest rate rises. The euro rallied by 1.5% on Thursday following the comments.


BARLEY

  • Old crop feed barley narrows discount to feed wheat

Old crop feed barley has narrowed its discount to feed wheat this week, with wheat values falling more than feed barley. This makes feed barley look an attractive sell; however, buyers have little interest. Barley usage is likely to reduce before the end of the season as rations get reformulated.

  • Old crop malting barley at a significant premium to new crop

The malting barley market has had a very quiet week and maltsters both in the UK and Europe now have only small volumes of crop 2021 malting barley still to purchase. With old crop malting barley at a significant premium to new crop, brewers, distillers, maltsters, merchants and farmers alike will all look to carry minimal stocks into crop 2022.

  • Slow new crop malting barley trade

Spring barley sowing has progressed this week in many areas and conditions have been reported as good. There has been little new crop malting barley trade, with lack of liquidity of barley offered from farms and equally muted demand from maltsters.


OILSEED RAPE

  • Old crop rapeseed values steady

Old crop rapeseed values are relatively unchanged on the week despite plenty of volatility in the market. A renewed focus on weather markets has had a profound effect on soybean values in the last couple of weeks which makes for a pleasant change after complex energy and Covid-related issues have been gripping markets. The weather focus is currently on South America where dryness is hampering soybean crops in Brazil, Argentina and Paraguay among other locations, causing nine consecutive green sessions on March soybean futures.

  • Rapeseed values correlate to crush volumes

The market is awaiting the next United States Department of Agriculture (USDA) update on 9th February which will provide new South American soybean production estimates. Many private estimates now see Brazilian bean production below 130 million tonnes, which compares to the USDA's previous estimate of 139 million tonnes. Rapeseed values do bear correlation to soybeans but, in a year with such low rapeseed supply, the markets have become detached to an extent which means rapeseed values will be much more dependent on how much of the product is crushed in the UK and EU for the remainder of the year. It is currently difficult to predict crush volumes with high seed prices and inflated energy prices squeezing the crushers' margins tightly. 


 PULSES

  • Minimal spot demand for old crop beans

Old crop bean markets continue to drift sideways. Shippers are waiting for vessels to arrive, many of which are sold with the option to roll into the next contract month. Given these delays, export silos are full and there is minimal spot demand. With the lack of further export buying interest, it is likely that this spot demand situation will continue over the next several months. Human consumption buyers are still absent from the market due to the volume of Australian beans beginning to arrive in Egypt. They may remain absent into the spring due to the size of the Australian crop this year. 


 FERTILISER

  • Urea/AN

European urea prices remain firm, but the market is seeing a drop in US levels. Several Eastern European countries have been importing products, including Ukraine, which has suffered from domestic shortages due to major production issues.

European levels have moved up by €50-60/t whilst the US has seen a decline of $60-70/t. It is unlikely that the drop in US values will have any significant impact on UK prices.

India has issued a new tender to start taking product in March - earlier than normal - with a potential volume requirement of between 1.2 and 1.5 million tonnes. This is adding support to current Egyptian and Algerian levels.

CF Fertilisers withdrew prices last week for February delivery of ammonium nitrate (AN) as the commitment was fulfilled. However, it has now re-issued terms for March delivery at a small price increase.

This week, Russia introduced a total ban on AN exports from the 2nd February to the 1st April. News of CF Fertilisers' current prices and supply of good quality nitrogen is therefore welcome news. Please speak to your Frontier contact for more information.

  • Liquid/UAN

Good levels of new business have been seen coming in this week across the UK, indicating that there is still outstanding business to be concluded. Growers who are holding out in the expectation that values will soften as we come into the spring are risking availability issues during the usage period. As the market switches from a 'push' to a 'pull' phase, supply and demand will become a key factor in market activity, which should be considered in all forward planning.

As the weather remains fine and is predicted to remain so over the next ten days, there has been a steady flow of spring call offs. This is expected to intensify and put some early pressure on logistics due to ongoing beet campaigns in certain regions and subsequent overstretching of haulage capacity.

  • PKs

Potash and phosphate TSP markets remain neutral as global demand slows down. DAP, however, continues to steadily increase in value on the back of strong global demand. Furthermore, India is expected to soon return to the market to buy its traditional tonnage.

Industry analysis shows that UK tonnage committed by growers for phosphates is a long way behind, which is understandable given market conditions, However, this is leading to fewer imports and lower stocks, with DAP in particular looking very tight. Growers should look to cover their DAP requirements now as physical availability may well be limited in some UK regions in the coming months.

In general, shipments of raw materials coming into the UK have been delayed for various reasons, adding to the haulage crisis. Unfortunately, it is likely the situation will only become more challenging as we move into the application period. It is strongly advised that growers who need products for February to April get these covered now to avoid any disappointments on deliveries and delayed nutrients for crops.


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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