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- Wheat prices slip
World wheat markets have slipped this week. A lack of fresh bullish features has led to spells of profit taking from speculative buyers who still carry significant long positions in grain futures markets. US weekly wheat export shipments and sales were particularly disappointing. However, the weekly export pace from the EU was far more encouraging. Wheat shipments for last week were one million tonnes, taking the total now shipped to over 17.5 million tonnes.
Analysts estimate the EU, including the UK, will ship just over 26 million tonnes. This will leave end June stocks extremely tight at around ten million tonnes. Last season from the beginning of March to the end of June, the EU shipped over 13 million tonnes during a period when there were no Russian export taxes and therefore stronger competition. However, this week, the world's major importers, Egypt, Algeria and Saudi Arabia, have again been absent from the market, leading to concerns for export demand for the remainder of the season and adding to market weakness. Remaining old crop supplies may be tight but carry a $40-50/t price premium to new crop. Perhaps importers will target cheaper new crop supplies if they have sufficient stocks to wait until they are available.
- Black Sea exporters upbeat on 2021 crop prospects
Despite spells of extreme cold weather this winter, officials from both Russia and Ukraine have expressed confidence for 2021 wheat production prospects. According to the Hydrometeorological Research Center of Russian Federation, the Russian winter has been relatively mild, allowing winter drilled crop condition to improve. In early December, dry soils left 22% of winter crops in a poor condition. This was the highest volume of poor condition crops recorded for seven years. However, at this point in the season, it is reported that only 7-9% are in bad condition. It's rare to see any improvement in crop condition over the winter so this is reassuring for Russian growers but, nevertheless, only 4% of crops were in poor condition at this time last year.
Meanwhile, a Ukrainian government official said favourable winter weather could present a record grain crop in 2021. Wheat production could rise to 30 million tonnes, which compares to only 25.5 million tonnes in the 2020 harvest. This season wheat exports could rise to 22 million tonnes compared to 17.5 million tonnes in 2020, leaving it unnecessary to apply any form of export restriction.
- Australia downbeat
This season, Australia produced a record wheat crop following three devastating drought years. The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) puts the crop at 33.3 million tonnes, which will allow exports to jump from nine million tonnes last season to 21 million tonnes this season. Coupled with world wheat prices at a seven-year high, this provides a major boost for Australian farm incomes. However, ABARES is already signalling problems ahead for 2021-22. A return of dry weather will see a cut in the wheat area drilled and suffering yields, resulting in a crop of 25 million tonnes. Wheat available for export is predicted to fall to 16.5 million tonnes.
- New export activity limited
The latest estimate from the Agriculture and Horticulture Development Board (AHDB) of overall UK feed barley usage sits at around 5.3 million tonnes, which will be close to a record in recent years but still leaves the UK with an exportable surplus to clear.
- 13% reduction in barley usage by maltsters and distillers
Figures released this week by the AHDB show barley usage by maltsters and distillers in the UK this season is down by 13% when compared to last year and 16% down overall in comparison to 11 months ago, at the very start of lockdown.
- Barley usage in compound animal feed high
With pubs due to open on 12th April in England, there is hope that demand will once again pick up. In contrast, barley usage in compound animal feed is up 38% this season. This just highlights how competitively-priced and readily available feed barley has been in the UK this season.
- Spring work begins in the UK
With drier weather over the last week across the UK, spring work has started, with fertiliser being applied to winter barley crops and spring barley drilling beginning in lighter land in the south and east of England. We have seen some end user buying interest this week for new crop malting barley. However, with continued demand uncertainty in the brewing sector, maltsters will probably only look to buy to cover malt sales as they make them, which should keep demand relatively muted. Heavier land drilling of spring barley should start in the next couple of weeks, weather permitting.
- New crop prices lagging old crop values
The main talking point in domestic rapeseed markets this week has been the dramatically different performance of old crop prices relative to new crop levels. Spot prices into the UK crushers have gained around £20/t since the end of last week, but new crop levels have only gained a more modest £4/t, leaving them at a hefty £50/t discount. This implies a much more plentiful supply position in 2021/22, both domestically and in global oilseeds markets although precise evidence to support this is hard to find.
- Europe reliant on Australia in 2021/22
Europe and the UK are going to have a heavy deficit in rapeseed supply for 2021/22 and, given that both Ukraine and Canada are going to have less availability next season, the UK will become even more reliant on Australian supplies. The EU is expecting to land 2.25 million tonnes of seed from Australia during the January to June period, compared to one million tonnes the previous year, making Australia Europe's single biggest supplier in 2020/21. The impact of this is that the UK will once again be very reliant on getting Australian seed to cover the second half of the 2021/22 campaign. This situation is less than ideal, considering Australia is a region that is ten months away from harvest with notoriously unpredictable weather and variable yields.
- South American harvest struggling
The news from South America doesn't get any better. Argentina is still burdened by overly hot and dry conditions which are stressing its soybean crops at a critical time while, further north, Brazil is suffering from too much rain. In the past month, 300-400mm of rain has fallen in the Mato Grosso region, delaying harvest, damaging mature crops and leading to some fields being abandoned. 250 vessels are reported to be waiting to load at Brazilian ports although currently the export target of 14-15 million tonnes in March is looking like a tall order. This will shift demand further north to the US, which already appears to have an impossible combination of domestic crush demand, export commitments and insufficient stocks. It will be interesting to see how the USDA deals with this conundrum in its World Agricultural Supply and Demand Estimates (WASDE) report due out next Tuesday.
- Little demand for old crop beans
Demand for old crop beans is getting harder to find as compounders are well covered through to April and there are still lots of beans on farm unsold. With stronger sterling and no export demand, old crop values would be expected to fall further in the coming weeks. There may be a small window of opportunity as a few feed companies are looking to price supplies for the summer months, but these opportunities will be very limited.
- Strong chance of establishment for spring beans
The warm weather two weeks ago and the current continuing cooler dry conditions is allowing plenty of spring drilling, with spring beans already drilled in areas from the south coast to north Lincolnshire. Unlike the previous two years, this year the beans will have a much better chance of establishment and therefore be more able to cope with drier conditions later in the season. The Frontier pulse pools are still open and will remain so until the end of March. Please contact your local Frontier farm trader for more details.
- Spring cereal seeds
The ordering of spring cereal seeds has been brisk this week as more favourable conditions have allowed drilling to commence in many parts of the country. Unfortunately, the long and wet winter has had an anticipated knock-on effect for germination levels in English seed crops, with a large percentage of crops having to be rejected for not meeting England's rigorous seed standards.
As a result, supplies of spring wheat, barley, and oat seed are now under significant pressure, with both variety choice and overall availability shrinking quickly. Any final requirements for spring barley and spring oats should be ordered quickly to avoid disappointment. Spring wheat is now likely to be difficult to find and a switch to another spring cereal may be required.
If not already completed, it is strongly advised that any farm-saved seed planned for drilling this spring be tested for germination.
- Other spring seeds
Spring pea and bean seed is now in very short supply although supplies of spring rapeseed and linseed are still available with multiple varieties to suit different requirements. Availability of maize seed is generally good. Although some popular varieties have sold out, Frontier is still able to offer a wide range of varieties for use in forage and anaerobic digestion with all maturity classes covered.
It has been a great week for spring land work but a quiet week for fertiliser news. World ammonia prices continue to increase due to production problems, mainly in the US. European nitrogen levels firmed again on the back of higher ammonia prices but, in the UK, the price remains stable with slower demand as farmers finally get the chance to apply first dressings. Imported nitrogen supplies are tight with more vessels due in the second half of March and some even delayed until April. CF Fertilisers is expected to review pricing in next few days and the next move will depend on current UK stocks versus possible export returns.
Granular urea prices have held firm again this week with supply still tight for March and April vessels. Demand is still expected from India, so there have been no signs of any new season offers to the UK as yet.
Phosphate and potash prices have remained static this week. Currency is helping on any new purchases, but most blenders will have the majority of their raw materials either in stock or due in shortly.
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