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Frontrunner - 5th May 2023

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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. The report this week is read by farm trader, Sophie Whiteman. 


WHEAT

  • Wheat markets down again

World wheat futures dropped again this week, extending their 2023 losing streak. US Chicago Board of Trade (CBOT) figures dropped to their lowest since December 2020 and London old crop futures struck a new contract low which was almost half the peak price it achieved during May last year.

Russian wheat exports remain the primary negative price driver, dominating world trade with an estimated five million tonnes shipped during April alone, taking the season's total above 37 million tonnes. Analysts see over 44 million tonnes likely to be shipped by the end of the season on 30th June.

Recently concerned over the falling wheat prices, the Russian Government advised traders not to sell their wheat below $275/t FOB which effectively put a floor in markets. However, that theory was diminished when Egypt held its latest wheat tender. Russia sold over half a million tonnes of old and new crop, with prices down to $260/t for old and $250/t FOB for new for delivery in June and July. The low prices shocked markets and led to the further round of selling.

  • Kremlin attack rallies markets

With futures prices falling to new multi-month lows mid-week and speculative shorts sitting with near record short positions, a drone attack on the Kremlin was sufficient to trigger a wave of short covering and a price rally late on Wednesday. CBOT wheat gained 5% in quick time. Russia blamed the attack on Ukraine and the potential for increased unrest between the two countries led to bigger fears for disruption of Ukraine Black Sea wheat supplies. Representatives from the UN are due to meet Russian officials in Moscow this week to discuss the extension of the export deal from 18th May – Russia is already suggesting the outlook will not be encouraging.

This latest bout of hostility is hardly helpful and with it being unlikely that the list of Russia's demands regarding the lifting of Western sanctions will be met, it would not be a surprise to see at least a temporary halt to vessel inspections.

  • Improving picture for US wheat

Recent spells of rain have helped yield potential for some of the driest US winter wheat areas and that was reflected in an improving condition report. The US weekly Crop Progress Report showed that winter wheat advanced two points to 28% 'good/excellent' which is in line with trade expectations following recent rainfall and is one point ahead of last year.

The area of winter wheat in drought shrank again to 51% from 53% last week and from 69% at the beginning of the year. Some support comes from the slow spring wheat planting with just 12% in the ground; this is behind trade expectations of 14% and also behind the 22% average. 26% of corn is drilled which is considered very much the norm. 


BARLEY

  • Old crop demand picks up

Old crop feed barley is up just over 2% on the week, marking a break from the long-term downtrend. The price move may be a result of a tighter supply of old crop feed barley than was anticipated by trade estimates earlier in the crop year, especially with demand from consumers more prevalent than farm sales this week. Conversely, the old crop malting barley has seen an uptick in farm selling but very little demand from maltsters, with most believed to be well covered for this season.

  • Export demand subdued

There has been little export demand this week and prices have come under pressure due to vast amounts of cheap Russian grain continuing to make its way to buyers, many of which may otherwise be in the market for UK barley. The grain corridor deal brokered by the UN and Turkey comes to an end on the 18th of May, while negotiations on a future deal began this week. Any decision and resulting influence this will have on the export market remains to be seen.

  • New crop looking good

The UK's new crop barley is now well underway and in very good condition, provided we continue to get the climate conditions we have seen so far this season. Some domestic new crop malting barley demand has come this week, but farm selling has remained slow. The French crop is doing similarly well, with crop ratings the highest they have been for over a decade.

The drought in Spain is the main new crop climate issue today. Prolonged dryness is taking its toll on crops there and with no rain in the forecast for the foreseeable future, it is likely the country's new crop will now be materially affected - coming in well below the 6.6 million tonnes of barley harvested there last year. As we get closer to harvest and these situations develop, it will be interesting to see if the reduction in Spanish supply can outweigh a potentially significant old crop tonnage reportedly being carried to new crop in Europe.

With only a few weeks left until harvest, speak to your farm trader regarding strategies for marketing your new crop barley. A diverse range of contracts are available to help growers manage risk appropriately. 


OILSEED RAPE

  • Less volatile week for rapeseed prices despite geopolitical events

In a week where Ukraine was accused of attacking the Russian president and oil lost over 8% of its value in two days and another US bank collapsed, rapeseed values remained remarkably constant. This is due to the lack of rapeseed business that is occurring both on farm and in the trade and into the crusher, which is leaving the market in a stalemate. This lack of business is compounded by the current heavy supply situation for rapeseed.

In the rapeseed oil world business is also slow, with consumers remaining nervous and acting in a hand-to-mouth fashion. It seems as long as uncertainty remains over global economic performance, demand for vegetable oils remains unclear. For crushers with facilities known as 'switch plants' i.e., those that can process either soya or rapeseed are seeing greater benefits for processing soybeans, thereby reducing demand for rapeseed.

  • Update on global rapeseed crops

In Europe, rapeseed crop development is well underway and looks positive overall. However, there are potential signs for lower quality crops in France and the UK, both of which would welcome some warmer temperatures. In Canada and Australia, conditions are largely favourable and whilst areas may be slightly down on last year, the global supply and demand balance can afford it with a larger than usual carryover into next year. 


 PULSES

Recent rallies in old crop bean values have faded away over the past week, as there are still more farm supplies coming into to the market. Despite some limited export buying interest, stronger sterling has kept a lid on any further price rises.

There is still very limited trade in new crop bean markets, but consumer interest would reflect values that are £5/t lower than old crop beans - around £225/t ex farm depending on location. 


 FERTILISER

  • Urea / AN

This week there has been a slight increase in spot AN buying activity across the UK following the price reduction last week on domestic product, and also with improved weather conditions. UK natural gas prices continue to slide back and today are approximately 50% lower than they were last year. European AN prices for June delivery are being offered at a discount to May, with some prices now appearing for the UK market. However, most are holding off buying until UK nitrogen terms are published.

Urea markets are also subdued following some last-minute buying, but growers are now watching and waiting for AN markets as the premium for AN over urea narrows. This is due to gas and ammonia prices falling to levels not seen since before the energy crisis.

  • Liquid

With final applications on winter crops underway, UK UAN suppliers remain focussed on the current season and in the marketplace with competitive offers on a full range of products for application this spring. Urea products for foliar application are available, with and without sulphur, for use on potatoes or milling wheat crops where growers are targeting protein lift. Products are available in IBCs and bulk depending on farm storage capacity.

  • PK / NPKs

There has been more interest this week in P&K blends plus straight MOP, TSP and DAP, as the prices are now stable and reflect replacement values. Recent corrections on NPK prices have also created more spot activity.


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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