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Frontrunner - 9th May 2024

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WHEAT

  • Prices surge to multi-month highs

After a sluggish start to the year, wheat prices experienced a remarkable turnaround in the last days of April, surging to multi-month highs. Speculative funds, which had previously driven prices lower by building record short positions in wheat futures markets, reversed their stance.

The threat of adverse weather to the 2024 wheat output in the Northern Hemisphere prompted widespread short-covering, propelling wheat prices sharply higher. Paris December 2024 contracts reached €251, marking their highest level since August last year.

  • Factors driving price movements

The primary driver behind this surge is the downward revision of Russian wheat production estimates, which some now anticipate falling below 90 million tonnes.

Prolonged dry weather in southern Russia and eastern Ukraine has impacted the wheat-producing regions, with temperatures dropping and hard frosts forecasted. As a result, Ukraine's wheat production for 2024 is expected to decrease, with exports slipping to 14 million tonnes from 17.5 million tonnes the previous year.

Similarly, EU wheat production estimates have been revised downwards by five to six million tonnes compared to last year, with Brussels reducing its estimate to 120.2 million tonnes.

  • Concerns for US wheat

Traders remain concerned about the dry conditions in the western US winter wheat states.

However, the latest US weekly crop progress report showed winter wheat slightly better than expected, with crop condition improving to 50% rated 'good/excellent'.

Spring wheat planting also surged ahead of expectations, reaching 47% - twice the progress made last year. Despite this, corn planting lags due to heavy rain across much of the corn belt, potentially causing further delays.

  • USDA's first look at 2024

This Friday, the United States Department of Agriculture (USDA) will publish its initial assessment of the world's 2024-'25 balance sheets.

Questions persist regarding the accuracy of data in the current season's World Agricultural Supply Demands Estimates (WASDE) report, particularly regarding corn production in South America.

There are discrepancies between USDA estimates and those of other agencies, such as the Buenos Aires Grains Exchange's (BAGE) which reduced its estimate for Argentina. This underscores the need for clarification.

Eyes are also on the USDA to address concerns about Northern Hemisphere wheat production, which prompted speculators to close their short positions and adopt long positions.


BARLEY

  • Feed barley values firm following futures rally

The gains in futures markets have propelled both old and new crop feed barley values higher during the last week, but not as high as wheat, widening the discount to barley from around £20/t to £23-£25/t.

Increased farm selling, coupled with spring barley emergence, boosted confidence among farmers amidst rising grain prices.

  • Spring barley progress and planting

With the English spring barley area planted and Scotland nearing completion, the market awaits clarity on the UK's spring barley acreage.

Despite initial forecasts of a larger spring barley area, factors such as Sustainable Farming Incentive (SFI) schemes and adverse weather conditions may have influenced cropping decisions.

As crops develop, attention turns to weather patterns and acreage estimates to gauge market dynamics.


OILSEED RAPE

  • Upwards momentum in rapeseed markets

Rapeseed values have continued to appreciate over the past week, buoyed by concerns over European new crop conditions and South American crop sizes.

As mentioned earlier in this report, unfavourable weather in Europe, coupled with reports of sub-zero temperatures in Russian growing regions, added to market sentiment.

Commercial funds, previously holding record short positions, have begun buying into oilseed markets, signalling optimism among traders.

The USDA's forthcoming report on the Brazilian soybean crop is anticipated for further market guidance.

  • Old crop dynamics

As crusher cover for old crop rapeseed nears completion, old crop values have begun to discount against new crop values.

Despite higher-than-average farm supplies, strong demand persists, particularly for difficult-to-source positions in July and August. However, market dynamics may shift as demand is satisfied and new crop values stabilise.


 PULSES

  • Tightening UK bean supply

The UK's old crop bean supply has tightened significantly over the past month, driving prices higher by £23/t.

Increased demand from buyers unable to procure alternative protein sources has fuelled the rally, particularly for positions in July and August. As demand levels off, the market anticipates a return closer to new crop values.

  • Challenges in new crop market

The new crop market for beans remains difficult to value, with minimal demand for export and limited buying interest from UK consumers.

Initial expectations suggest ex-farm bean prices trading at levels reflecting £45-50/t over November wheat futures, although these historically high levels may not be sustained if the growing crop exceeds expectations.

 FERTILISER

  • Urea/AN

Purchasing of domestic ammonium nitrate has continued at a steady pace and competitive level, with higher activity at the start of May than in previous years due to field conditions.

This activity looks likely to continue over the next few weeks whilst final decisions are made on crop requirements and crop potential discussed.

CF Industries has issued its price for June - at a slight discount to May - which is aligned with other European producers due to the extension of the season.

All global ammonium nitrate producers will now be keeping a firm eye on forward raw material costs (from June onwards) of either natural gas or ammonia. These could depreciate before producer confidence grows and with it bring volume offers for summer deliveries.

Urea offers are circulating in the UK and Europe for delivery from July onwards, as global markets find a floor price. We advise you check the origin of any product and ensure you're purchasing new stock.

  • Liquid/UAN

UAN stocks across the UK remain at good levels, with another vessel having arrived in an eastern port during the last week.

A full range of nitrogen and nitrogen sulphur grades are available for prompt delivery, for those with a demand for additional nitrogen for crop '24.

Where dry, settled conditions remain and with no rain in the short-term forecast, you're likely applying UAN in situations with low crop cover (such as recently drilled spring cereals or land due for maize). You should include a urease inhibitor, such as BASF Limus Perform, with your UAN applications to reduce the risk of nitrogen losses through ammonia emissions.

As expected, terms are now available for a full range of foliar products, targeting protein uplift in milling wheats, but also to extend canopy duration in OSR and feed wheats to increase yield.

  • Straights/NPKs

Markets have been subdued, with no changes over the last week. Internationally, phosphate markets look weak and potash flat.

In India, DAP has been under pressure due to the lack of government price support, which has resulted in importers decreasing prices. This move looks likely to introduce lower numbers into Europe and the UK, and it is likely that the UK will suffer from local shortages whilst shippers wait and stocks are replaced.

The global potash market is waiting to see what prices India and China settle at - this might not be fully known until July 2024. In the meantime, South America will soon enter the market with major buying.



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