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Frontrunner - 4th January 2019

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WHEAT

  • Global markets

US and EU markets started the new year trading firmer, led by stronger US wheat prices which are now able to compete against cheaper origins with the prospect of increasing exports. However, the Russian Agricultural Ministry have increased wheat production figures by two million tonnes to 72 million. This means that despite higher internal prices and a firmer ruble, Russia will potentially be back to continue their push of exports.

Argentinean farmers continue to battle against widespread heavy rainfall as harvest nears completion. With just 10% of their 19.5 million tonne crop left to harvest, it looks likely we will see some yield and quality issues as a result of the poor weather. However, the extent of this damage remains to be seen.

The European Commission updated their soft wheat export figures for the 2018/19 season to 8 million tonnes, down 27% on the 10.9 million at the same stage last year. High internal prices and cheaper global origins have, like the US, limited the EU's competitiveness so far this season. Despite this, the uncertainty around Argentinean quality makes it increasingly likely that French exports could pick up into North Africa in the near future.

  • UK markets

As markets slowly re-emerge from the Christmas break, volumes in physical and futures trading have been low and it could take until next week for cash markets to fully resurface. The weaker pound continues to underpin prices by pushing the UK closer towards export parity. In the latest figures from the Agriculture and Horticulture Development Board (AHDB), they project a 2.3 million tonne wheat ending stock which could leave an exportable surplus up to 800,000 tonnes. As a result, with domestic consumers well covered into the new year we could reach a point where we place a greater reliance on exports later in the season. Therefore, current prices shouldn't be overlooked as a sensible hedge.

New crop prospects look good domestically, with an estimated 4% increase in wheat acreage drilled and now well established in near ideal conditions. Weather will play a key role in deciding yield over the next six months but even average yields could produce a 15 million tonne crop. Again, if current prices show a profit above the cost of production then it would be advisable to consider marketing a proportion of your 2019 crop.


BARLEY

  • Slow trading start to 2019

With many farmers and traders not yet active in the market, it has been a slow start to 2019 for barley. Markets are largely unchanged since before Christmas, with bids to ports in the south and domestic outlets further north. We continue to see little new demand however, and most bids are to fill existing sales.

The UK domestic malting market remains quietly firm, with Propino trading at a premium to Planet and existing demand for distilling type barley and winter varieties in Yorkshire.

  • Brexit uncertainty

With most feed barley demand for January and February at the moment, Brexit uncertainty looms. Feed and malting barley values are still at attractive levels but with new crop at a significant discount – and with a lack of clarity around how the export landscape will look in April – it is hard to see an argument for holding onto unsold barley any longer.


OILSEED RAPE

  • Soybean markets

Oilseed markets have been seasonably quiet, however, there does now appear to be a story in soybeans. Weather on the developing crop is far from ideal, with Argentina and Southern Brazil too wet and central Brazil too dry. This has prompted analysts to start trimming crop forecasts from this region. As a result, the benchmark Chicago Soybean contract has seen four consecutive days of higher closes. There is support to the market while we see an uplift in demand from China and a reducing South American crop.

  • Political disruption

Oilseed traders are continuing to watch and focus on an increasingly uncertain macro outlook and political situation in the USA. There seems to be strong indication that buyers in China have purchased a large amount of soybeans from the US over the holiday period, while the US Department of Agriculture (USDA) is unable to report due to a partial government shut down. With an air of anxiety returning in the US in relation to the economy, there is mounting pressure on President Trump to conclude trade talks with China.


 FERTILISER

  • Nitrogen/urea

Markets are picking up pace following the Christmas holidays. CF Fertilisers are yet to come out with new terms but we could see them released Monday amidst the start of their 'spring campaign'.

It will come as no surprise, given the backlog of tonnage that still needs to be delivered, if this initial January offer will be limited in volume. Plant shut downs and issues with the overrunning of planned maintenance will likely put pressure on logistics until March. If you haven't bought your nitrogen and nitrogen sulphur grades yet, please discuss available options as soon as possible with your Frontier contact.

  • PKs

Potash and phosphates are all about currency so it is advisable to keep a look out for increases as they start to creep in. Replacement costs, just on exchange rates alone, are looking to add approximately £10/tonne. 




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