Frontrunner - 12th December 2024

WHEAT

• USDA signal stronger global demand but not for wheat

The United States Department of Agriculture (USDA) published its December World Agricultural Supply and Demand Estimates (WASDE) report earlier this week, but with minimal changes for the world's wheat balance sheet.

Compared to last month, the USDA found an additional one-million-tonne carry in from last season and see small production cuts for Canada which is down 40,000 tonnes in line with Statistics Canada (StatsCan). The EU is also down 1.3 million tonnes and Brazil is down 400,000 tonnes.

There are small cuts in consumption - Ukraine is down 300,000 tonnes and Brazil is down 200,000 tonnes but this still leaves a record use of 802.47 million tonnes. Stocks at the end of the season are 300,000 tonnes up on last month but are at just short of 258 million tonnes, so they'll still be ten million tonnes down on the year.

The report did not address a potentially misleading estimate for Russian wheat exports which were cut from 48 to 47 million tonnes. However, with wheat shipments to the end of November already up to as much as 25 million tonnes and a new year grain quota cut to 11 million tonnes, the USDA estimate looks unachievable.

The USDA corn balance sheet presented a more dramatic set of changes with world production down 1.5 million tonnes to 1.218 billion tonnes. Small increases for Ukraine and Canada were more than offset by cuts for the EU, Mexico and Australia.

The notable change came for world consumption - up by almost eight million tonnes on the month to 1.2377 billion tonnes. Yearend stocks are 7.6 million tonnes down on the month and now almost 20 million tonnes down on the year.

The bullish corn data is likely to offer wheat price support short term.

• Questions over Russia in 2025

Southern Russia experienced a prolonged dry summer and autumn which lead to a notable decline in soil moisture levels. Delayed planting and poor establishment suggested potential problems for the 2025 crop potential, although early estimates from analysts were above 81 million tonnes.

That figure might prove optimistic as the Deputy Prime Minister of Russia has stated that a large proportion of the country's winter crop is in poor condition and will need to be planted with spring crops. The state's weather forecaster said that 37% of winter crops have not sprouted or are in poor condition compared with just 4% last season. Just 31% are in good condition, the worst on record, compared with 74% last year.

With a tighter old crop export quota now in place and clear issues for 2025 production potential, the future pressure on world wheat prices from the world's largest wheat exporter may ease. Temperatures are forecast to drop sharply, although protective snow cover is reported.

• UK wheat battling sterling

Our domestic wheat market has moved in a relatively narrow range in recent days, despite more promising continental prices.

Paris wheat futures have risen by over €10/t from their contract low posted at the beginning of December, but the London wheat futures market has struggled to match these gains.

Consumers sit with adequate cover until the new year and wheat price potential has been challenged by continued sterling strength. This week, sterling rallied to its highest compared to the euro since the beginning of July 2016 when the UK voted to leave the EU.

Renewed inflationary pressure and doubt that the Bank of England will cut interest rates in the near-term leaves sterling attractive for investors. With domestic wheat prices reflecting full import costs, the trend in sterling strength isn't helping UK domestic prices.

BARLEY

• Old crop discounts to wheat continue to narrow in the South

This week has seen relatively modest farm selling relative to December '22 and December '23. However, farm grain continues to slowly come forward, particularly in northern regions of England.

Although futures values have risen this week, the motivation for selling is likely to be other factors than price alone, as markets have been in a downtrend since October. Discounts to wheat continue to narrow, most notably in the southwest of the country and more recently in East Anglia.

Consumer demand has matched slow farm sales this week, though not unexpected once seasonality and early good demand leading up to December are accounted for. Generally, compounders are well covered until March now. Most of the bids this week have been trade shorts requiring nearby delivery positions.

• Still too early to assess new crop winter barley

It is still very early to comment on new crop winter barley, as much of it is still emerging. However, some compounders have sought cover beyond July 2025. From the little trade that is on the books, it appears that discounts are materially narrower for new crop while quality becomes more known.

OILSEED RAPE

• Rapeseed values increase

Rapeseed values continued to appreciate this week, mainly due to StatsCan revising its Canadian production numbers lower for this season - 17.8 million tonnes versus last year's crop of 19.1 million tonnes. This would mean a lower exportable surplus than first expected, although the trade is currently doubtful of this production number.

If the US tariffs on Canadian products are delayed until 2026, this could have a positive effect on European rapeseed values because available supplies will likely tighten for this marketing year.

Other vegetable oils are also helping support domestic values, as palm and sunflower oil have to continue to manage low supply levels. Currently, palm oil is a premium to rapeseed oil which is a rare occurrence.

The soybean complex remains in ample supply, with good US and South America crops. Many anticipate this market to be lower but it's currently holding steady despite a large managed fund short in these futures markets. 

 PULSES

• Feed beans

The market remains calm and quiet, with few bids coming forward. Although values are now falling, beans remain uncompetitive to alternative protein sources, specifically rape meal.

There is a lack of forward commitment from consumers, meaning we expect requirements to come in last minute and on an 'as required' basis.

Demand for UK feed beans in the export market remains slow because of the amount of feed beans being offered from the Baltics.

As seen in the Processors and Growers Research Organisation (PGRO) market update for December, the issue for farm feed beans today is the quality:

"When harvesting at relatively high moisture (20% and over), delays in drying can lead to severe discolouration, mould formation and even some fermentation in store. Batches affected in this way face rejection, even for feed. They are effectively unusable without serious remedial actions incurring significant waste. (Beans above 18% moisture will deteriorate more rapidly in store.)"

Source: https://www.pgro.org/pulse-market-update-december-2024/

• Human consumption

Although we have seen good Australian bean crops, there are logistical issues, which will cause a delay in them being received by the Egyptian market. This means there continues to be an opportunity for UK export of good quality beans in the January and February months. 

 FERTILISER

• Urea/AN

At the beginning of this week, UK AN terms were reissued into the market for February delivery. The terms reiterated the tightness of supply for good quality AN, indicating a tighter window for delivery turnaround time for the usage period.

As previously reported, production has been curtailed across Europe and in the UK due to the rising energy costs. Therefore, the market is not awash with products and we advise you look at your outstanding nitrogen requirements and discuss options and product availability with your advisor. The backdrop of energy prices remaining firm is likely to uphold AN pricing into spring 2025 and there's currently no signs of weakness in either gas or ammonia prices.

It has also been reported that calcium ammonium nitrate values in Europe have been affected by another price increase of around €15. This will inevitably have a knock-on effect to nitrogen sulphur grades in terms of availability and pricing.

Urea values in the UK have begun to firm again. Influencing factors are traders covering their short positions in the EU market, leading to Egyptian FOB values stabilising. This has caused levels to increase over $20 since November and they're still increasing. Additionally, the latest Indian tender was announced earlier in the week, citing volumes of around 1.5 million tonnes.

Expectations are that this will keep prices stable into quarter one of 2025, along with limited unsold stocks in the UK.

• UAN

The delivery window for pre-Christmas tank fill continues to narrow. We encourage those with capacity to take delivery of product this winter, ahead of spring usage. Competitive values for both straight N and N/S systems continue to be offered when compared against solid products.

With this in mind, those who now have a clearer picture on their total UAN volumes required for the season, and on review need additional product, are advised to contact their representative to discuss the full portfolio of products available. Currently, NP and NPK values remain unchanged for spring movement.

• PKs/straights

Potash levels have started to show signs of easing from August through to October. However, as demand has increased, we have seen MOP (and potassium containing products) stabilise and levels look likely to increase into spring as demand continues. Whilst volumes will be available, current stocks are being managed 'hand to mouth' so delaying purchase decisions could impact delivery timescales after the Christmas break.

With regards to phosphate, levels remain firm and any fluctuation in pricing globally has been the result of moves on currency. Demand in India and South America has increased which is further tightening the supply of product into other countries, including the UK.

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