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Frontrunner - 8th December 2023

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WHEAT

  • China rallies wheat markets

This week, China - the world's largest wheat producing country - has put pen to paper with US wheat exporters. Published sales data showed US traders selling around one million tonnes of US wheat to the country and in the process triggered a sharp price rally. As a result of this, the short covering launched Chicago Board of Trade (CBOT) futures 15% higher from the previous week's multi-month lows.

The sales to China were surprising given recent news of its intention to roll December purchases of French wheat forward through to next spring, suggesting China was all done on nearby buying. However, astute Chinese buyers could not resist US wheat futures falling to their contract lows last week and took full advantage.

This season, China's wheat production estimate is 137 million tonnes. With an anticipated demand of 153 million tonnes, the United States Department of Agriculture (USDA) now expects China to import 12 million tonnes - even with this stocks will drop six million tonnes on the year to 134 million tonnes.

  • European prices fail to match

Whilst US markets rallied, European futures wheat markets managed no more than a token gesture in improving prices.

The weekly EU wheat export update was up 525,000 tonnes, but this was not sufficient to meet the pace needed to clear the surplus. Cumulative exports are up to 12.52 million tonnes in comparison to 15.26 million tonnes last year. Yet another week with no change for Bulgaria highlighted the lack of full data, as mentioned in previous reports.

The market was encouraged by the news of three vessels loading in France that are bound for China to meet sales - some of which were previously rolled to the new year. The gap on exports from last year may give a less bearish outlook, but strong competition from the Black Sea continues to limit EU sales. This was highlighted by the first Egyptian tender since 12th October, where Russia dominated offers to the General Authority for Supply Commodities (GASC). Egypt bought three cargoes at a sterling equivalent of £213.50/t for milling wheat.

London wheat futures managed to gain little more than £4/t from their recent low, as the domestic feed wheat market continues to trade £10/t above levels that would leave it competitive to export.

The lowest animal feed production for seven years did little to boost the domestic demand outlook. Support comes from the 2024 UK wheat production uncertainty, as wet weather sets in again.

  • Supplies boosted ahead of USDA

The USDA is scheduled to publish its December World Agricultural Supply and Demand Estimates (WASDE) late on Friday, but other officials updated the Canadian and Australian 2023-24 wheat production estimates ahead of this.

Statistics Canada raised its production estimate to 31.95 million tonnes, up from 29.84 million tonnes previously.

The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) slightly increased its previous wheat production estimate by 100,000 tonnes to 25.5 million tonnes, although this is still over a third below last year's 39-million-tonne record.

The USDA said 24.5 million tonnes for Australia and 31 million tonnes for Canada in November.


BARLEY

  • Feed barley markets flat with the lack of export demand

Feed barley markets have remained suppressed on the week, despite rallies in global futures markets. The reality for the UK feed barley market is that the UK is still too expensive to export, with values from Eastern Europe and the Black Sea significantly cheaper.

The trade is focused on the domestic market, with sellers willing to trade barley at wider discounts than previously. With prices stagnant, farmers have slowed their selling of feed barley and with the Christmas break approaching any increase in farm selling is unlikely until the new year.

New crop feed barley prices have also been flat on the week, with farmers willing to sell at wider discounts (more than a £20/t discount to feed wheat) than we would normally see for the time of year.

The total barley area will increase for crop '24, but with a lower winter barley area farmers are more focused on how they market a potential increase in spring barley on farm.

  • Domestic feed production lower but barley usage slightly higher

Domestic buyers still have grain to purchase for the new year, but total animal feed production is lower year-on-year in statistics published by the Agriculture and Horticulture Development Board (AHDB) this week.

The statistics also showed that barley usage has increased on the year, trading at a wider discount to wheat, especially in the last couple of months. With the discount widening we would expect this trend of barley usage to continue in the coming months. However, the weight of the exportable surplus that the UK has is likely to anchor any rallies for old crop feed barley.

  • Malting barley markets balanced

Export demand still exists for malting barley, although a stronger pound versus the euro has meant UK ex farm values have fallen on the week.

Farm selling has slowed over the last couple of weeks, with many growers waiting for contracts to be moved to assess what is left in the shed. Premiums, however, remain large and given that they have been for most of the season, farmers are well sold on malting barley. This is because there has been more acceptance of prices compared with feed barley.


OILSEED RAPE

  • Rapeseed values slowly appreciating

Over the last week, European rapeseed values have been slowly rising whilst soybean and Canadian canola markets have moved in the opposite direction.

One of the main drivers has been strong nearby demand from regional crushers, which are trying to fill requirements in a market where domestic farmer selling is slow and behind average. In addition, Black Sea offers are starting to slow and physical movement of seed out of the area is sluggish. New crop Australian seed is only available for delivery in late January to early February, with farmer selling behind pace there too.

On Monday 4th December, Statistics Canada revised the Canadian canola crop up from 17.37 million tonnes to 18.33 million tonnes, implying the crop hasn't suffered as much as expected and adding some weight to the global supply and demand picture for rapeseed. However, much of Canada's canola and its production is headed into US biofuels for the first time this year due to increased production capacity and commitments.


 PULSES

  • Low activity in beans

The bean market continues to see a lower volume of activity, which is normal for this time of year.

There has been little selling from growers and merchants, which has caused values to rise as domestic feed compounders have had to pay more.

With rapeseed meal prices and other mid-range proteins still too expensive, the demand for beans remains relatively strong.

Remember, if you have a balance of human consumption beans, this is the last opportunity to sell your crop before this market is finished in the new year.


 FERTILISER

  • AN/urea

Last week brought some softening on urea values from North Africa, which helped gain some large volume sales. This week, we have started to see stability come back into the market, albeit fragile.

US urea market values have risen mainly due to better corn returns and North African product seems to be in higher demand based on Chinese stock restrictions.

With regards to AN, European producers are still on reduced production and some have even shut down due to higher gas values that are waiting on some reprieve.

As mentioned in previous reports, AN tonnes will be in short supply going into the new year and as a result, we expect to see strong demand for granular urea for early applications.

With the application window fast approaching (40 days) we strongly advise you take advantage of current offers for December and January delivery.

  • Liquid/UAN

UAN values remain unchanged in the current market and, with Christmas fast approaching, the delivery window will shift to spring.

It's important to ensure tanks are fully utilised and that orders are accurate as we head into the application period.

We also still have an opportunity to convert any customers looking to switch to liquid for this season, with tank availability for installation in spring.

It's worth remembering that with the urea stewardship scheme coming into place on 1st April, we advise growers to have a stock of Limus Perform in store to stay compliant with the regulations.

  • PKs

Phosphates remain relatively stable to firm, mainly driven by higher demand creeping in from the US and reduced inventory supplies in its market.

The main suppliers into the European market tend to be of North African origin. Given that sanction restrictions remain in place on Russian and Belorussian products coming into some EU member states, values should remain stable for quarter one of 2024.

Potash values have weakened slightly over the past week with the pound versus euro exchange rate playing its part on replacement costs.

UK supplier stocks remain tight and new cargoes will not arrive until late January.



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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