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Russia continues to dominate world wheat export trade whilst the US and EU fall further behind, leaving falling prices.
Leading analysts revised estimates and put the Russian wheat crop between 91 and 92 million tonnes, with exports for the season between 48.5 and 49.5 million tonnes. 20% or more of that export target has already been achieved during the first two months of the season, with 9.7 million tonnes reportedly shipped by the end of August at record pace.
In contrast, the latest EU wheat export data from Brussels paints a dismal picture. Wheat shipments to the 3rd of September were 544,000 tonnes, taking the cumulative total to 5.034 million tonnes. Last year, over the same period the EU had shipped 7.385 million tonnes which is almost 50% more than this season's pace.
Fresh business this week is hardly encouraging for EU exports and there were more reported sales of Russian wheat to Pakistan and Egypt. Sales for 480,000 tonnes were made to Egypt in a private trade at $270/t, including freight. This compares to the $270/t FOB floor price offered last week to Egypt in the General Authority for Supply Commodities (GASC) tender, which excluded the freight cost.
In the middle of the week, Paris September wheat futures fell to new contract lows, creating a huge €22/t discount to the December 2023 position. This highlighted a lack of demand for nearby French wheat.
Following the first survey-based results, last month the United States Department of Agriculture (USDA) cut its yield estimates for US corn by 2.4 bushels per acre down to a total of 175.1 bushels per acre. This signalled the second highest US corn crop on record after the 2016-17 crop year which was just below 384 million tonnes, 35 million tonnes up on last year.
However, subsequent crop tours and estimates leave a wide-ranging view as to where yields may actually end up. A week ago, the Pro Farmer crop tour results found a figure of 172 bushels per acre for the US corn crop. However, this week that was trumped by analysts, Informa, which pegged the crop at 177.5 bushels per acre.
The most recent results from brokers, Allendale, predicted the lowest figures for the US corn crop - seen at 171.5 bushels per acre and a crop some eight million tonnes below the USDA.
The USDA will update its World Agricultural Supply and Demand Estimates (WASDE) report on 12th September, within which the above figures could be revised.
The Australian Bureau of Agricultural and Resource Economics (ABARES) made further cuts to its Australian wheat production figures this week.
Estimates are now seen down at 25.4 million tonnes as El Niño continues to warm up. This is 800,000 tonnes lower than its previous estimate and compares with last year's figure of 39.7 million tonnes, which was the third consecutive record crop.
In August, the USDA reported that 29 million tonnes are likely to follow the ABARES estimate in next week's September report. The impact of the smaller crop will be felt in the second half of the season, with a smaller surplus to ship. Australia is likely to have just 18 million tonnes to export, which compares to the 32.5 million tonnes that was exported last season.
With a smaller Canadian crop and surplus, together with an Argentinian crop suffering from dryness, the world's importers have an increasing dependence on Russian wheat to meet their needs.
Currently, there is very little export interest. Spain, which has a significant import need, continues to receive offers of 30,000 tonnes shipped from the Baltic and Black Sea ports at much cheaper levels than what can be offered by UK sellers in 4 to 7000 tonne coaster-sized vessels. This is largely due to the much lower shipping cost per tonne, but also reasonably priced barley from farms in those regions.
A result of this is that UK feed barley is around €5/t too expensive – something which has largely been the case for the last three months. The exception is when there is an opportunity for a buyer who needs a smaller quantity for a destination away from the large Spanish ports.
Ireland has been the only buyer which has consistently required smaller cargoes. We expect more of the same until the new year, when hopefully the UK can become more competitive. With a current surplus of feed barley of around 7-800,000 tonnes, the country has probably only loaded or sold forward 25% of the total that's needed.
As the Danish and Swedish spring barley crop harvest nears its completion, harvest buyers have taken a step back from purchasing whilst they assess beer demand and determine whether the malting barley supply is as tight as first thought a few weeks ago.
Farmer selling slowed over the last two days as prices fell around £10/t. The EU supply and demand spreadsheet shows a tight picture and with the three major exporters: Canada, Australia and Argentina all having dry forecast concerns, it will be a while before further downside moves can appear, if at all.
The UK spring barley crop is really the only one from the European exporters that has had the 'full package' in terms of nitrogen, screenings and good harvest conditions.
While malting premiums have fallen £10/t this week, they are still in the region of £55-£70/t depending on location, as well as variety and nitrogen content. This means crops harvested with a moisture content of over 14.5% need to be dried slowly and then cooled before delivery. This is especially true if selling into the ports, as most buyers want a contractual maximum of 14.5% moisture.
It's important to bear in mind that if your crop was harvested two weeks ago and sold for October, then it could be in store for eight weeks before movement. The risk of germination failure and the barley losing its quality condition could therefore increase if it's not dried at the correct temperature and cooled sufficiently with fans and pedestal aeration.
Canola crop conditions in Australia and Canada have seen some strong confirmed numbers in recent weeks. Statistics Canada (StatsCan) recently estimated Canadian canola production at 17.5 million tonnes and Australia's Department of Agriculture (ABARES) estimated its canola crop at 5.2 million tonnes. These numbers are a step down from last year's production but with a strong carryover and new crop production number in the EU, the world is set for abundant rapeseed supplies this season. This structure means rapeseed oil will remain relatively cheaper in relation to the group of competing vegetable oil products, as it tries to find extra demand to get rid of its surplus.
In an unusually diverging trend, crude oil continues an extremely strong run after more production cuts on members of the Organisation of the Petroleum Exporting Countries (OPEC). Normally, this kind of move would provide some real support for vegetable oils and their oilseed origins, but due to supply and demand dynamics this is not currently occurring.
In domestic terms, the UK harvest is virtually complete with yields averaging around 3.2 tonnes per hectare on an area that Defra has recently pegged at 6% higher than last year. This therefore gives the UK around a 35% increase in import dependence to fulfil crush demand, which will keep UK prices strongly correlated to global import alternatives.
Little has changed in bean values this week while they are still tethered to London wheat prices.
Growers are still selling in volume and we expect this to continue into the next week, with the demand picture remaining strong in the UK and the rest of Europe for feed beans.
International demand remains high for human consumption beans and new uncertainty surrounding Baltic bean quality may extend the short window for UK human consumption trade. The supply for high-quality human consumption beans remains tight, with growers still able to collect a £20-£30/t premium if their beans meet the grade.
Global urea markets that had been steady to soft unexpectedly reignited over the weekend following the news of more potential Indian import demand. This was subsequently confirmed on Monday afternoon, with the tender due to close on 15th September. The outcome of what volume is booked, and the prices achieved from this tender, will help indicate the likely market direction into late 2023 and early 2024.
The news was, however, enough of a catalyst to see buyers rapidly return to cover large volumes for September and October as market values increased.
Coupled with the fresh Indian requirements, China is now reviewing its export volumes, with one major producer pushing for export restrictions, enabling a return to increased domestic stocks.
With all of the activity in the global urea markets, levels have increased by $50-$100/t (depending on region), but it was noticeable that European buyers weren't active which may be a sign they are covered for the next few months.
The activity within urea markets, as well as developments in Australia regarding potential strike action that could impact 6% of global liquefied natural gas (LNG) supplies, caused European and UK ammonium nitrate suppliers to pull prices.
Urea ammonium nitrate (UAN) prices that have remained stable for a number of weeks are unaffected for now, but a change is to be expected soon to reflect higher raw material costs and market conditions.
Gas prices are still predicted to increase as we start to see colder temperatures. However, added complications such as the strikes, volatility and uncertainty are set to remain with all nitrate supply.
With unseasonal warm temperatures and settled conditions forecast, anyone drilling oilseed rape in the coming days and planning to seal the crop with UAN should look to include Limus Perform within the application. Nitrogen losses through ammonia emissions are higher when conditions are warm and dry, and are further exacerbated where there is low crop cover.
All suppliers remain in the marketplace with offers for both autumn tank fill (for growers with tank capacity) and spring delivery. The full range of grades offered at these values for both straight nitrogen and nitrogen sulphur gives you the opportunity to cover known requirements at values that are cost competitive against solid systems in the UK.
Markets are unchanged, with demand low in most areas whilst many growers determine their final cropping plans.
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