Frontrunner - 11th August 2023

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WHEAT

• Black Sea supply fears rally markets

The week started with a sharp rally for wheat futures prices following a weekend of military action between Russia and Ukraine. Ukraine seaborne drone attacks on Russian commercial shipping, including a tanker near the Crimean, caused renewed wheat supply fears. Russia is currently shipping between 3.5 to 4.5 million tonnes of wheat each month, with approximately 70% of this total coming from its Black Sea ports. Any tangible disruption to sea freight will have a positive impact on prices, especially if importers are forced to seek supplies from alternative sources such as the EU or the US. Analysts further increased their Russian 2023-24 wheat production estimate to 88 million tonnes and forecast that wheat exports will reach 47.5 million tonnes. The Russian wheat export floor price has increased to $260/t from $250/t. However, Russia still secured the Egyptian tender this week which totalled 235,000 tonnes.

• Ukraine establishes new corridor initiative

The Ukrainian Navy says it has established a new temporary humanitarian corridor that will enable commercial shipping to access Ukrainian Black Sea ports for grain within days. However, the threat from sea mines and Russian forces remains. On Wednesday it was reported that Russian drones destroyed buildings and damaged up to 40,000 tonnes of grain in the Danube port, Izmail, where it is reported that a long queue of ships were waiting.

Ukrainian grain shipments in July were 40% down on the previous month, highlighting the current export challenges. High wheat yields but a loss of quality in Ukraine might not help export potential due to increasing supply and competition in feed grain markets. Just 40% of the Ukrainian wheat crop is seen as milling standard, compared to 70% in a normal year.

• EU wheat crop keeps shrinking

In its latest production estimate, analyst Stratégie Grains cut EU wheat output to 124.73 million tonnes, down 1.44 million tonnes on last month. At the beginning of the year, it was believed that the EU crop would be five million tonnes higher than current estimates, but the weather has not been helpful to optimise yields. Cuts made in France are the main reason for the smaller EU crop, with it now down to 35.7 million tonnes. Prolonged rainfall in July has stalled the French harvest in the north and this is the case for many northwestern EU countries, impacting quality as well as yield.

Germany is a key bread making wheat exporter - including shipments to UK customers - but nearly 50% of its crop is yet to be harvested and there is evidence of sprouting in uncut fields. German milling wheat prices are up €20/t on the week, but finding offers is challenging. Similar wet weather conditions for the UK have caused some lower Hagberg results, but in general early cut wheat samples show good quality. However, with only 16% of UK C2 seed sales for this season being Group 1 varieties, the domestic availability is tight without losses due to poor quality. The majority of Group 2 samples tested show low protein and will be potentially fit for a low-grade specification at best. 

BARLEY

• Market shrugs off war risk and domestic demand picks up

Markets rose nearly 2% in the first half of the week but have since given back those gains. The short bullish spell was mainly due to an intensification of the war between Russia and Ukraine. There were Ukrainian drone attacks on Russian vessels near the port of Novorossiysk last weekend – the first attack of its nature.

Conversely, physical feed barley prices saw downward pressure, recovering those losses latterly as domestic demand picked up. This was particularly evident in the South West of England and Yorkshire. Consumers were most active in the forward months, seeking cover for September onwards. Very slow UK export pace has left a sizeable surplus of barley in the country while domestic premiums remain strong.

• Exports remain uncompetitive

An even greater supply excess in Europe - compared to the UK - has put pressure on prices. Cheap grain continues to flow into eastern Europe via road and rail from Ukraine and more recently through Romanian ports situated on the River Danube. In Poland, there has been prolonged heat and drought during the growing season to a degree that could materially impact grain quality. It remains to be seen how severely the crop will be affected by the poor weather, but it is likely that we will see a higher proportion of Poland's crop sold as feed grains. What is clear to date is that UK barley offers for export cannot compete with Russian, Ukrainian and now Romanian offers – UK barley prices will have to compete harder in the future to allow surplus amounts to find export demand.

OILSEED RAPE

• Oilseeds markets in period of consolidation

Oilseeds markets have seen reduced volatility and overall price movement this week, indicating a period of consolidation as logistics, supply and demand fundamentals come under scrutiny. As mentioned in previous reports, the physicality of logistics out of the Black Sea have become increasingly important, as buyers assess whether seed deliveries will be delayed or even arrive at all. Over the past few months Black Sea rapeseed has been moving relatively efficiently to end destinations. However, this flow is now slowing and becoming more complicated. Counter to this is the readily available homegrown crop currently being harvested. Progress this week has been relatively swift, with the majority of crops south of the Scottish border cut and in store. Yields so far look to be slightly below average and under last year's relatively high levels. 

 FERTILISER

• Urea/AN

The latest Indian urea tender has shown strong support for urea pricing, given the volume it still has to buy and the shortage of product available to the market in the near term. Offers exceeded 3.38 million tonnes, but it's thought that the country may only be able to secure less than one million tonnes due to the short timescale of its delivery requirement. Counter offers from Indian fertiliser company Indian Potash Limited will be submitted and will have to be agreed by 14^th August. Some urea producers may look elsewhere to achieve higher premiums.

Gas values also spiked this week following news that Australian liquid natural gas (LNG) workers plan to strike. Talks are ongoing to avert this action, but with Australia accounting for 10% of the world's LNG stocks, the possibility of stiff competition from Asia against European buyers on large cargoes looks likely.

Within the European nitrogen market there are currently eight producers offline, resulting in a shortage of ammonium nitrate (AN). Some trade experts predict to see AN move up again as tight supplies start to show. Domestically, CF Nitram offers are still available for spot and February delivery, offering excellent value in the market. Frontier also have other AN and nitrogen sulphur products available for summer and autumn.

• Liquid/UAN

Nitrogen phosphate + potash (NPK) options are still available for prompt delivery where oilseed rape is due to be established in the coming weeks, both in bulk and IBCs. If you're planning to use UAN to seal down oilseed rape, you should look to include Limus Perform within this application to reduce the risk of nitrogen losses through ammonia emissions. This is because volatilisation is exacerbated where there is low crop cover and conditions are warm and dry.

At present, spring terms across a full portfolio of grades are available if you have a firm requirement for the season. Terms for autumn tank fill for those with empty storage capacity on farm are also available.

• PKs/Straights

Potash and phosphate markets continue to show signs of firming. However, we will monitor this over the coming weeks and advise accordingly on the right time to buy based on timeliness of supply and value.

With oilseed rape establishment upon us, the availability of di-ammonium phosphate (DAP) remains a concern in the short term. Other options are available, including calcium ammonium nitrate (CAN) and triple superphosphate (TSP) based products. Please remember the NVZ Nmax limit for oilseed rape in the autumn is 30kg N/ha. We advise liaising with your Frontier farm trader or agronomist to address your requirements at the soonest opportunity to ensure the product is available for application at drilling.

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.