Frontrunner - 12th May 2023

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WHEAT

• Concerns for wheat production prospects

Last week's wheat price gains were quickly lost this week as the weight of old crop stocks, demand concerns and improving 2023 production prospects motivated selling interest. Despite uncertainty surrounding the renewal of the Black Sea export corridor deal and increased hostility from Russia towards Ukraine, eastern EU states are heavy with previously imported Ukrainian supplies.

EU weekly wheat exports climbed to 26.49 million tonnes this week, leaving the pace 2.6 million tonnes ahead of last year and, although on target to reach the season estimate of 30 million tonnes, the carryover stocks will be up four million tonnes on the year - over 14 million tonnes in total. With the 2023 EU wheat crop expected to rise by over four million tonnes on the year and ongoing strong export competition from Russia, pricing prospects are challenging.

However, there are concerns for 2023-24 wheat production prospects for other major wheat producers. Ukraine's wheat production is predicted to only amount to half of its 2021 volume and Russia's wheat production is predicted to be 20 million tonnes less than last year. In Argentina, dry conditions are causing farmers to delay their planting and Australian crop potential is threatened by the current El Niño temperature fluctuations. In the US, hard red winter wheat crops are historically poor and dryness is a concern in parts of Canada.

Today, Friday 12^th May, the USDA will publish its first 2023-24 World Agricultural Supply and Demand Estimates (WASDE) report; its content could trigger a change in the market.

• Markets return to recent multi-month lows

Having seen some element of recovery at the end of last week, wheat futures have once again fallen towards the levels of the multi-month lows seen recently. Several factors combined to strengthen the selling pressure, but Russian wheat exports remain a primary driver. Having shipped over five million tonnes in April, Russia has maintained its export pace during the early part of May. Between 1^st and 10^th May a further 1.322 million tonnes have been shipped, taking the total for the season up to 45.5 million tonnes according to the Russian Grain Union.

Russia has also dominated new crop trade this week, reportedly selling over 500,000 tonnes of wheat to Algeria. In recent months, traders have been advised not to sell Russian wheat at prices below $275/t FOB in order to maintain margins. However, recent sales with delivery for July are thought to have been made at prices as low as $273.50/t including all freight costs, which has set new price lows for next season.

Markets were also pressured by the latest talks in Istanbul regarding the renewal of the Black Sea Grain Initiative, which provides a safe export corridor for Ukrainian produce through the Black Sea. Representatives from Russia, Ukraine, the UN and Turkey met on Wednesday and Thursday to progress discussions for an extension of the deal from 18^th May.

• Record Brazilian corn crop

Wheat markets have also felt pressure from upbeat corn production estimates which are leading to strong competition with wheat in feed markets. In its latest monthly update, national supply company CONAB, put the total crop at 125.5 million tonnes, 11% up on last year.

US 2023-24 corn crop potential has been boosted with planting progressing at a fast pace. Over the past week, planting jumped from 26% to 49% complete, which is well ahead of the average of 42% for this point in the season.

Further negativity was added to world corn markets on news of cancellation of 272,000 tonnes of US corn sales to China.

• USDA report highlights falling global stocks

Later today, Friday 12^th May, the United States Department of Agriculture (USDA) will publish its first world balance sheet estimates for 2023-24, which is anticipated to show a fall in world wheat stock for the end of next season and some price support. From the world's major wheat importers, it is anticipated that only the EU will see an increase in its wheat production. Analyst group Stratégie Grains sees EU wheat production rising to 130 million tonnes – up almost five million tonnes on the year.

However, a fall on the year in other regions is likely. Russia's stock is expected to drop from 104 million tonnes in 2022 to 84-86 million tonnes in 2023. Ukraine's stock is set to fall to 16 million tonnes from 21 million tonnes and, as a result of the El Niño weather system, Australian stock is set to fall 10 million tonnes on the year.

In Argentina, farmers were expecting to expand their wheat planting to 6.7 million hectares, up from 6.1 million hectares the previous year, but persistent drought may prevent this from being realised.

Challenging weather in Canada could also result in production issues and, in the US, winter wheat crop ratings are low. Although planting is up 11% on the year, a high abandonment rate is expected – especially in the primary producing state Kansas, where 68% of the winter wheat crop is rated 'poor/very poor'.

BARLEY

• Old crop feed barley values remain supported

Old crop feed barley values have remained fairly rigid on the week. There is very little compound demand domestically, but trade shorts are keeping the market bid with a continued lack of farmer selling on old crop feed barley. There is export demand from Spain for old crop barley for June/July shipments, but the UK is being undercut by cheaper origins and has not secured any trade with Spain in the last couple of weeks.

• UK barley facing competition as harvest approaches

Spain also has demand for new crop feed barley. The country has endured drier than average conditions since the start of the calendar year, which has resulted in poorer crop condition and a larger import requirement. However, the UK faces competition from France and Germany in securing sales.

• Contract options for crop 23 still available

Looking forward to Crop 23, Frontier is offering a range of marketing options to help growers manage risk and market their malting barley crops. Offers include guaranteed minimum premium contracts, futures related distilling contracts and malting barley pools. Please speak to your local farm trader for more information.

OILSEED RAPE

• Declining price trend continues for rapeseed

Rapeseed prices declined further this week. At the start of the week Sweden, which is the highest per-capita biofuel user in Europe, announced that it would soon be reducing its vegetable oil inclusion rates in its biofuel. The Swedish government has cited the cost-of-living crisis as one of the main reasons for this change, as the vegetable oil component typically increases the cost of the biofuel. However, there has been strong kickback from environmental groups due to the increased emissions that would result from reducing the volume of vegetable oils in these fuels.

There is currently a lack of trading activity in rapeseed markets. Demand is extremely slow in the human consumption rapeseed sector and in the biofuel sector, which is causing crusher interest in rapeseed to decline. This is causing markets to soften as there is little motivation to trade in this commodity.

Currently, all remaining stocks left on farm or in merchants' stores in Europe are slow to come out. If they are released, this could further soften the market.

Prospects for new crop rapeseed also remain positive, with a European crop totalling 20 million tonnes close to being realised. This is relaxing for crushers who are generally reluctant to show bids for the new crop period.

However, conditions in Australia and Canada aren't perfect, which could boost rapeseed prices in the coming months; although, it is worth noting that harvests in these regions come much later than in Europe.

 PULSES

• Old crop bean markets await news on Black Sea Grain Initiative

Old crop bean markets have slowed significantly as there is minimal import interest and domestic buyers are mostly covered for the summer positions. New crop is also very quiet, with buyers reluctant to commit until there is further news on whether the Black Sea Grain Initiative export corridor agreement will be extended and until today's USDA report is released.

• Wet conditions impact winter bean crops

Winter bean crops continue to benefit from the warm, wet growing conditions, but some later-sown spring crops of both peas and beans are struggling to thrive in waterlogged field conditions. The latest Defra planting figures suggest that bean acreage is up 12.8% and peas acreage is down 6.1% year on year, but these figures are generally considered to be estimates rather than definitive reports.

 FERTILISER

• AN/urea

Urea markets have remained subdued over the past week with little fresh interest in the nearby positions and a slowdown in demand for later in the year. Ammonia prices have weakened slightly on higher production and availability in both the US and Europe.

Closer to home, domestic ammonium nitrate values are gradually softening as we near new season offers in the coming weeks. Importantly, UK gas values at the time of writing are trading at less than 80p/therm on the current market, although it is important to bear in mind that futures values are trading substantially higher. The current volatility of gas prices, coupled with the potential impact of the Russia-Ukraine war on energy prices, will affect ammonium nitrate production costs in the months ahead.

• UAN/liquid

Ample supplies of UAN are arriving into the UK this week, allowing UK liquid suppliers to continue to offer product for prompt delivery this season. Growers with a requirement for additional tonnes of nitrogen, nitrogen sulphur or foliar urea for crop 23 should contact their Frontier representative to discuss available options.

• PKs

Activity remains fast-paced with top-up orders of NPKs to finish off crops coming through, which has subsequently stabilised prices over the last two weeks. The outlook on both potash and phosphates in the longer term remains difficult to predict given the politics involved, but possible weakness is on the cards as we move towards harvest and the establishment of the OSR market.

Crops across the UK look like they have a lot of potential and the importance of crop nutrition will come into sharp focus over spring and early summer. With that in mind, we recommend that you ensure 2022 crop offtakes are being replaced to maximise yield.

Get in touch

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.