Frontrunner - 11th August 2018

WHEAT 

• Supportive markets

Wheat markets continued the supportive tone for the early part of the week, fuelled by further concerns over production in various regions in the world. Australia is the latest country to further reduce its likely output, with some suggestions of this year's crop being nearer 16 million tonnes versus 21 million last year. This comes on the back of reductions in Russia and the whole of Europe.

• Brexit

The continued uncertainty over how the Brexit process may play out has seen a significant weakening of the pound versus the euro, which has further supported UK ex farm prices.

Consumer demand continues to show itself on a daily basis, as buyers look for cover following obvious concerns around the recent price increases.

• Harvest

UK wheat harvest progress looks to be nearing 75% done. Yields continue to be mixed but overall lower than a year ago.

• USDA report

Yesterday's USDA wheat headline focussed on a reduction of world wheat production by seven million tonnes.This was considerably less than expected by the market and the majority of this reduction was attributed to Europe.

Corn ending stocks were increased by 6.5 million tonnes, mainly by a projected increase in the US. The initial impact of these updates has been for the markets, at a global stage, to move lower.

BARLEY

• Feed barley prices pause near recent highs

After a brisk trade over the last couple of weeks, with both growers and compounders taking part, transactions have slowed over the last few days. Growers seem to have caught up with their selling pace and compounders/livestock producers have made a start covering their winter rations. Barley's discount to the wheat price has narrowed by £3/t this week, as corn and wheat imports arrive into the northern half of the UK, pressurising wheat prices. Barley, however, is needed in the ration to balance those high energy raw materials and is also easier to use direct onto farm. Overall, the supply is finely balanced.

• English spring malting barley harvest 70% complete
  

​OILSEED RAPE

• Prices rising slowly

French rape futures hit new contract highs on Tuesday this week, ahead of the key USDA report on world production, consumption and stocks which was released yesterday. Over the past four months, cereal prices in the UK have appreciated by over 40% but OSR prices have gone up by a more modest 15%. Global oilseed markets feel well supplied and are following other markets higher rather than providing the leading role.

• Black Sea competition
  

For European OSR markets the key brake on price rises remains competition from cheaper supplies from the Black Sea. The Ukrainian harvest is almost over and they are reporting an increased crop at 2.6 million tonnes, up from 2.35 million tonnes from the 2017 harvest. Russian yields are also up, giving a crop 26% higher than last year. The US soybean crop continues to be promising with 67% currently rated as being in good to excellent condition.

• Australia providing concern
  

Markets continue to watch the trade war between the US and China, with many traders believing that the Chinese will need to import US beans at some point. Cuts to European OSR production after the hot, dry summer have largely been factored into prices. However, the Australian position continues to give concern with a significant drop in production looking increasingly certain.

• USDA report out yesterday
  

Early signs indicate that yesterday's USDA report proved bearish for the oilseeds complex. Early trades in US soybean futures are showing losses of around 3%, as the report showed higher than expected US yield projections. Since the last report, production is pegged at 6% higher. Global production of oilseeds is expected to be 10.5 million tonnes higher in 2018/19, with only rapeseed expected to come in slightly lower. At the yearend, global oilseeds stocks are expected to rise by 8.3 million tonnes to 119.9 million tonnes.

 PULSES

• Down on yield and quality
  

As beans are harvested it's becoming more apparent that both yield and quality are much poorer this year.

The biggest quality issue is the level of bruchid and so far over 90% of samples have failed to make the grade for human consumption. In other years this would push down feed prices but, because of lower yields and continual strong demand from compound feed buyers, prices remain strong and still shadow wheat values.

The next move in the market will be determined by the quality and yield of later harvested beans from the Humber northwards.

 FERTILISER

• Urea

In general, prices are moving up again following an Indian tender this week and the global acceptance of higher levels for the rest of the year.

The European markets will now have very limited opportunities to purchase and receive physical product in time for applications. Any urea buyers should consider alternatives or purchase at prices offered today in the UK.

Exchange rates between the pound and US dollar, as well as the US sanctions on Iran, are also impacting prices.

• Nitrogen

The UK market remains steady during harvest, with slow uptake on the terms offered by Yara and CF Fertilisers. Most of the activity on the December CF Fertilisers' offer is due to the discount available versus Extran.

Imports into the UK are also slow, with other European markets looking more attractive and giving producers a better return.

• Phosphates (DAP/TSP)

Most of the activity on phosphates is for spot delivery as the rain arrives in many areas. DAP supplies are sufficient but a delay in TSP imports could cause some issues later in the month.

Again, phosphates look firm due to supply, exchange rates and higher production costs.

• MOP/PK market

The MOP market is slightly firmer, mainly due to exchange rates between the pound and US dollar as all product is now imported.

PK tonnage is available in most locations with demand increasing and pressure on raw materials. It is advisable to look at requirements soon.

There are some very good alternative quality compound options that include sulphur for spring application. Please speak to your Frontier contact for more information.