Frontrunner - 12th October 2018

WHEAT

• UK markets
  

UK wheat markets have traded defensively this week. Demand continues to be serviced by the market in an orderly fashion, keeping prices and milling premiums subdued. This comes even as the pace of farm gate selling slows significantly, in part due to the ideal drilling conditions this week.

• DEFRA figures

The market has now had time to digest the data released by DEFRA at the end of last week which cited a crop size above most trade estimates at 14.086 million tonnes. This is in contrast to earlier reports suggesting a crop size as low as 13.5 million tonnes. This larger crop size has undoubtedly given buyers of both feed and milling wheat some comfort.

• Forecast

It seems that the past month's 'head of steam' around the world pricing of grains in anticipation of any Black Sea export restriction has somewhat waned in the short term. Now, it's hard to predict where the next big move will come from in the grain arena. The priority for many growers will be to focus on a marketing strategy for their remaining stock, which is restricted by the fact that many destinations have already covered their pre-Christmas requirements. 

BARLEY

• English feed barley prices drift lower but hold up in Scotland
  

With compounders showing little interest in buying, values are slowly decreasing. While there is limited farm selling activity, some traders have been willing to sell October and November positions this week. The prospect for better post-Christmas export trade does exist but growers will need to be patient for a rebound in values.

• Scottish distillers and maltsters

Distillers and maltsters widened their specifications to give them sufficient stock of crop '18 barley. This is due to the poor yields and higher-than-average nitrogen which means there's less feed barley available.

• Malting barley continues to trade at relatively high premiums

The weather woes of the northern EU are well known but an added development to the current price picture is the low water levels in the French/Benelux canal system. This means maltsters and traders face much higher costs per tonne as barges leave some river ports only half full. To avoid these costs, buyers are loading their English cargoes early and leaving some of their French supplies until the river levels rise over the winter. This increased pace of export keeps port bids to the market supported. This is helpful in terms of our need to export earlier to avoid any issues surrounding Brexit. 

OILSEED RAPE

• A busy week of news
  

The release of UK production figures from DEFRA, some unexpected data in the USDA's World Agricultural Supply and Demand Estimates (WASDE) report and further volatility in currency markets have all impacted OSR prices.

• Bullish USDA numbers

There were no surprises in the DEFRA figures which estimated UK crop production to be down 6% against last year, with a 6.8% increase in plantings more than offset by a drop in yields of 11.4% to 3.4 tonnes per hectare. As ever, the USDA report was less about the actual numbers and more about how they measured up against trade expectations. There is no doubt that the US has a huge soybean crop, with substantial year end stocks anticipated given the ongoing trade dispute with China. However, the harvested area was unexpectedly revised down and this in turn reduced US production from 4.693 million bushels to 4.690 million bushels. Short term, this has been enough to firm US and European futures markets.

• Currency influence significant

The remaining backdrop in oilseed markets remains bearish, with rains easing Australian production fears, increases expected for South American soybean plantings and a continued availability of competitively priced imports into Northern Europe. For the UK in particular, there has been further pressure on prices as sterling has been firming alongside improved prospects for a satisfactory Brexit deal. The pound is at its firmest since late June. Currently, it sits 1.2% up against the euro this week and 3.5% up in the past six weeks. This would translate into a £4/t and £11/t drop respectively for domestic OSR prices if there were no other factors in play.

PULSES

• Old crop bean markets rise again

Continued demand from the market shorts have lifted values a further £8/t this week. New demand is now switched off as feed consumers can buy cheap alternatives but the merchant shorts still need to get out of their positions. Until this is done, values will remain strong. 

FERTILISER

• Nitrogen
  

CF Fertilisers, followed by Yara, released their new terms this week at £19 over the last December offer. Both suppliers are offering an attractive discount for growers to take product in November; this offer will expire on the 26^th October. January terms are now available at £7/t over the December price. The carry from the current November offer until January is £14/t and is very likely to rise again given this is a little lower than some imported offers into the UK.

Globally, the urea markets continue to firm. Low stocks in some regions, plus changes in supply routes to satisfy demand are starting to take hold.

UK imports of urea are less than 50% of a 'normal year'. It's difficult to see a supplier bring in more urea tonnage at current offers. Therefore, any buyers should look at the physical market now and buy, or talk alternatives with your Frontier contact.

• PKs

Markets are firmer again this week as replacement costs are higher into the UK – MOP/TSP and PK blends are all being affected.

• Availability
  

Logistics in the UK are very tight pre-Christmas. Prolonged availability issues with some suppliers have caused a backlog which will add increasing pressure to those who are yet to order but want to take advantage of the pre-Christmas prices.

The message remains the same – book early to avoid disappointment and protect your business against further price rises.

View markets, set price alerts, manage contracts and take advantage of extended trading hours with MyCropMarketing, Frontier's online grain marketing platform.