Frontrunner - 10th January 2020

WHEAT

• A strong start to 2020

The world wheat market took a bullish turn over the festive season and that trend has continued during the first full trading week of 2020. The Chicago Board of Trade (CBOT) wheat futures hit highs not seen since last June. Politics, weather and trade have all combined to encourage prices to move higher.

US wheat futures found particular support when Donald Trump's administration confirmed that 'phase one' of the new trade agreement between the US and China would be signed on the 15^th of January. Market bulls got very excited by this news, with rumours that China might fulfil its wheat import quota which would allow it to import up to 9.6 million tonnes of wheat in 2020. However, the reality is that China imports between 3 and 4 million tonnes annually, and it is likely this season that 1 million of those tonnes will come from France. It is also worth noting that according to the United States Department of Agriculture (USDA), China's year end wheat stocks are estimated at more than 147 million tonnes – over half the world's total wheat stocks.

• International trade continues despite rising prices

Egypt started 2020 with their buying boots on. This week, the Egyptian General Authority for Supply Commodities (GASC) secured 300,000 tonnes of wheat, with two cargoes each from Russia and Romania and one cargo from Ukraine. It paid an average of $245.75 per tonne including freight for delivery during the second half of February and this was $7 above its previous purchases made on the 10^th of December. Whilst Ukraine and the EU forge ahead with wheat exports at 40% to 50% ahead of this time last year, Russia is 3 to 4 million tonnes behind the previous season's pace.

It is worth noting that France offered only one cargo and was not competitive.

• UK 2020 wheat crop market lower

It was no surprise at all to see analyst, Stratégie Grains reduce its UK wheat crop estimate for harvest 2020, although some might still think the number is optimistic. With a reduced area of 1.64 million hectares, according to the Agriculture and Horticulture Development Board's (AHDB) 'Early Bird' Survey, it is expected that the UK will produce 13.040 million tonnes of wheat. It was encouraging to hear reports of several farmers drilling this week as weather conditions improved but, for many, fields remain waterlogged and the likely size of the 2020 wheat crop is still far from certain. Nevertheless, UK new crop prices are capped because they reflect import costs. Millers are already securing supplies from Germany to meet their needs.

• USDA

Late on Friday, the USDA will publish its World Agricultural Supply and Demand Estimates (WASDE) for January. The report is likely to reflect on issues in Australia, where a wheat crop of 16.1 million tonnes was previously estimated to be produced. Many put it at 15 million tonnes. However, overall there are no significant changes expected.

BARLEY

• UK feed barley competitive in the market

The feed barley export campaign continued this week but the UK still looks to be behind the pace needed to clear the weighty barley surplus. UK feed barley is currently competitive and we would encourage growers to take advantage of current values as they may come under pressure later in the season. Unlike feed wheat new crop feed barley is a discount to wheat, leaving no incentive for either farmers or merchants to carry barley to new crop.

• Malting premiums under pressure

Malting premiums remain under pressure this week. Many areas of the UK are already finding that extra haulage to malting barley destinations as well as small premiums are eroding most, if not all malting premiums compared with feed. The only limited domestic trade is merchants covering parcels that get rejected. The UK maltster is not accepting any fallbacks on quality, so any barley that does not meet full requirements should be considered feed. The export malting barley market is in a similar situation, with most EU buyers reporting that they have covered almost all of their requirements for the remainder of the season.

• Large spring barley 2020 crop predicted

With the well publicised issues with autumn wheat sowing, everything is pointing towards another large spring barley crop for harvest 2020 and, consequently, spring seed is likely to get tight. It looks prudent to have a contract in place for harvest 2020 malting barley. Frontier is offering guaranteed minimum premium contracts: feed and malting barley pools and futures-related distilling contracts. Please speak to your local farm trader for marketing options available in your area.

​OILSEED RAPE

• UK markets firm

Physical UK rapeseed prices have moved up by £7 per tonne since the last edition of Frontrunner was released before Christmas. With little change seen in exchange rates over this period, the movement in prices has been driven by market fundamentals. These include the prospect of tighter US soybean stocks as a result of the announcement of the imminent signing of the US/China 'phase one' trade pact, as well as tight supplies in the EU following low 2019 crop production figures.

• Paris futures up 15% in 2019

In contrast to European cereal markets, the oilseeds sector has seen a robust performance on prices throughout 2019 and particularly since the start of December. On 4^th March 2019, Paris rapeseed futures for the February 2020 contract were trading at €362 but by the start of December the market had moved up 7% to €388. However, in the past month this contract has increased a further 8% to €420 and pulled physical markets with it.

• Technical viewpoint

From a technical viewpoint, this Paris futures contract remains a 'bull' market with a strong upward trend confirmed and further price gains expected. However, the Relative Strength Index (RSI) currently sits at 83. This is a measurement of the heat in the market and an RSI in excess of 70 is an indication that the market is 'over bought' and is due for some 'price consolidation' to allow market participants to become more comfortable with where prices have moved to. This analysis suggests prices may not continue to increase so quickly in the coming weeks.

 PULSES

• Old crop bean values strengthen

Due to the low number of farm sellers, old crop feed bean values have firmed slightly over the last two weeks and buyers for January and February need to get their positions covered. Despite this short term rise, there appears to be more than enough beans to cover the potential demand. Beans are still too expensive for most UK compounders to use but those that have a core demand for pulses will readily switch to imported peas if values were to increase another £3-5 per tonne.

• High demand for human consumption beans

Demand for human consumption beans remains strong, as Egypt has now used up most of the old crop stocks as well as the recent new crop cargos from the Baltic states. UK quality is the stumbling block as the buyers are not yet prepared to lower their specs in order to receive new supplies.

We have now re-launched our crop feed bean buyback – please contact your Frontier local farm trader for further details.

 FERTILISER

• Nitrogen
• The New Year has brought with it new nitrogen prices. This week CF Fertilisers and Yara introduced a price correction to reflect international markets and current UK conditions. Regarding the weather, most of Europe is in the same situation as the UK with drilling but prices have not been reduced. As a result, this domestic drop in price looks as if it will be for a limited tonnage and time period. Nitrogen sulphur prices have also been reduced. Please discuss with your Frontier contact for more information.
• Straights

Before the original Brexit deadline at the end of October 2019, the UK fertiliser supply industry built up stocks to ensure adequate product supply during the traditionally busy autumn period. Following this, the Brexit delay strengthened sterling, resulting in cheaper imports. It is only now, due to lack of demand over the last four months caused by poor weather conditions, that new stocks are able to come into the UK and therefore reflect these lower prices.

Most straight prices, such as MOP, TSP and DAP, are at three-year lows. Given the size of the last harvest, these must be a serious consideration to replace vital nutrients to ensure the best possible is achieved going into harvest 2020.

Applications will start once land conditions allow which will cause increased pressure on logistics. Getting a delivery in January at current offers is advised. 

 SEED

• Autumn seed

After periods of drier weather for many parts of the country over the last fortnight, some progress with drilling of winter cereals has been made where field conditions allow. For January and February drilling of winter varieties, seed rates will need to be significantly higher than those used in the autumn to compensate for lower numbers of seeds established.

Last safe sowing dates for the different varieties can be seen on the AHDB Recommended List and should be taken into consideration, alongside the weather forecast, when making drilling decisions. We still have availability of autumn seed across several varieties suited to later drilling. These can be dressed and delivered to farm quickly to help capitalise on drilling opportunities.

• Spring seed

The high demand for spring seed seen during November and December has continued, with availability of spring wheat and spring pulses coming under particular pressure. Spring barley – already the largest spring crop in the UK by some margin – is expected to see an increase in the cropped area of more than 50%. This will put significant pressure on seed supply, which we are already seeing on the most popular varieties for malting and brewing.

Securing spring barley seed of dependable quality and a reliable variety will be a priority for many growers as their cropping plans for 2020 become clearer. The good news is that there are still stocks of UK-grown spring barley varieties with high yield potential.

Locking in a seed order, perhaps tied to a feed barley contract, would be advised to give some certainty to a challenging situation and avoid future disappointment.

Speak to your farm trader or agronomist for the latest availability of spring seed and advice on cropping and end-market options. 

Alongside its divisions, SOYL and Kings, Frontier is hosting a series of 17 winter training events. Open to all farmers interested in learning more about the use of digital technology to improve crop production performance, the events will include valuable insight into MyFarm and its role as a complete farm management platform.

You can find your local event and book your place by visiting our website.