By Frontier Trading Desk on Thursday, 14 April 2022
Category: Market information

Frontrunner - 14th April 2022

New crop European wheat futures rallied further this week and set new contract highs, reflecting trade concerns around the prospect of a long-term conflict between Ukraine and Russia. London November 2022 wheat futures briefly touched £295/t, almost double its initial trades and the contract low made in September 2020.

You can also listen to the Frontrunner podcast - press play to hear the latest report. The report this week is read by farm trader, Sophie Powell.

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WHEAT

New crop European wheat futures rallied further this week and set new contract highs, reflecting trade concerns around the prospect of a long-term conflict between Ukraine and Russia. London November 2022 wheat futures briefly touched £295/t, almost double its initial trades and the contract low made in September 2020. The extent of the loss of Ukraine as one of the world's major grain exporters was highlighted by comments from a Ukrainian official, who said corn exports this season would be 17 million tonnes. Following a record corn harvest of almost 42 million tonnes, Ukraine expected to ship 33.5 million tonnes and now almost half of that is no longer available to the world's major importers. This may explain why China turned to the US to buy another one million tonnes of corn this week, following the one million tonnes it bought last week which was split over old and new crop positions. There are also concerns for China's domestic crop potential, with Covid-19 lockdowns preventing farmers from planting in the key producing regions. The US Chicago Board of Trade (CBOT) corn futures also set new contract highs this week.

The Ukraine official didn't comment on wheat, but the United States Department of Agriculture (USDA) estimated in its March World Agricultural Supply and Demands Estimates report (WASDE) that shipments for the season are at 19 million tonnes, compared to the initial quota for 24.5 million tonnes.

Egypt returned to the market this week with the General Authority for Supply Commodities (GASC) buying 340,000 tonnes of milling wheat for delivery during May. It bought four 60,000 French cargos at $494.25, including freight costs. There was only one Russian and one Bulgarian offer, both of which were cheaper than the French offers and they were also booked.

This was the first purchase by Egypt since the conflict began in Ukraine. The country last bought wheat on the 17th February, which was three 60,000 cargos from Romania at $338.55 including freight costs. This highlights the severe impact the Russia/Ukraine conflict is having on food costs for those who can least afford it, as it demonstrates a 50% price rise in less than a month. Algeria were also wheat buyers, securing 120,000 of optional origin wheat with prices thought to be around $460 including freight.

Regarding the Egyptian tender, one offer from Germany was rejected because the offer moisture specification was maximum 14%, when the standard buying terms are maximum 13.5% moisture. This low moisture specification for milling wheat export markets highlights the challenge for UK supplies competing with a domestic market at maximum 15% moisture.

US winter wheat crops showed a small improvement in condition week on week, with ratings up two points to 32% good/excellent, although the poor to very poor remained unchanged at 36%. Overall, the crop is still in the worst shape ever at this time of year aside from the winter wheat crop in 1996. There was no advance in corn drilling, remaining unchanged at 2% complete - although spring wheat advanced three points on the week to 6% complete, this compares to the 5% average and 10% last year. Some weather forecasters see rain arriving in some of the neediest states later this month and this will be essential to help lift yield prospects.

BARLEY

The old crop feed barley market has been relatively quiet this week. The domestic market remains well supported, as the UK compounder continues to look for May and June supply. Trade shorts for April and May also support current prices which are at season highs.

With feed barley values now at parity to feed wheat in the south and East of England, end users are likely to reduce the purchasing of barley and go for wheat, which would be better value nutritionally.

Most of the activity around feed barley this week has been around the new crop market. With surging wheat prices dragging feed barley values upward, we have seen an increase in ex farm prices of around £18/t since last Friday. There are supply concerns because of the continued conflict in Ukraine and these are causing a shift to new crop. The new crop discount to spot prices has therefore narrowed significantly. Attention around the new crop is also on the weather in the Northern Hemisphere, which is usual for this time of year with particular focus on rainfall or lack thereof in the early stages of spring crop development.

The new crop malting barley market also remains well supported, with lack of sellers keeping values firm and little trade to speak of. The amount of rainfall on the spring barley crop in Europe in the next few weeks will set the tone for the market from now until harvest.

​OILSEED RAPE

This week, UK ex farm rapeseed values saw a boost in price, following trends in soybeans and other oilseeds as the world vegetable oil supply looks tight in comparison to expected demand. Last week, we touched on a number of key factors in the market which are maintained in this week's market complex. These included the Ukraine/Russia conflict, Canadian soil moisture, China demand and EU biofuel demand.

A new factor to mention now includes soybean production in Argentina where there are diesel shortages disrupting both harvesting the crop and logistics. In addition, this week Argentinian truckers, industry groups and the Government failed to make any progress in talks aimed at ending the ongoing driver strike - this creates a threat to crusher supplies and product exports during a key harvest period. On top of this, the Buenos Aires Grain Exchange (BAGE) put the harvest at 19% complete compared to the 25% average.

In the UK, the average rapeseed crops look strong with beneficial rains in areas this week. The crops look well, particularly in comparison to the EU crop, which could do with some more moisture in the near future. Conditions for planting in Argentina have been described by some as "too good", where growers will be looking to try and produce yet another record crop for export into Europe, Asia and Middle Eastern markets starting around December 2022.

 FERTILISER

The global urea market is quiet and awaiting details of the next Indian tender, which has been delayed beyond Easter with the hope to renew interest. The indication is that it may be slightly lower in value than previous tenders. This is unlikely to impact the UK prices, as the remaining granular urea vessels arriving into UK ports will fulfil order books for the current season. The UK has seen a quiet week on activity for nitrogen buying. Following earlier weeks' softening of the nitrogen price and continued stability in the UK gas price, demand still remains low. Given the further firming of grain prices for this harvest it would be sensible to reassess your breakeven ratio calculation, which will have fallen, meaning higher nitrogen rates can be justified and are worthwhile even at current fertiliser prices.


Main applications of UAN are ongoing across the UK, with on farm deliveries the main focus of suppliers and distributors. Haulage availability has eased throughout the spring but due to a slow and later start to applications, we are in the peak demand period as we head into the Easter break. Growers are urged to plan call offs well ahead, especially for use after the holiday weekend to make sure of continued supply into farm storage. 

Demand for top up tonnage is still strong for UAN, as growers look to maximise crop quality and output, with attention also turning towards foliar products that are a useful addition to the nitrogen programme.

Given the current dry, warm conditions it would be sensible to include Limus® Clear, the BASF urease inhibitor, in all UAN applications to reduce ammonia losses so more nitrogen is available to your crops. Please speak to your Frontier contact for further advice and information.

  • Phosphates and potash
Demand from South America for potash remains strong. Approximately a third of global requirement for MOP comes from Russia and with current sanctions and restrictions on Russia, many countries are reluctant and unable to source Russian MOP. This in turn means it's likely potash will continue to firm for the foreseeable future. Phosphate demand in the UK is low but prices remain stable. It could be worth considering purchasing potash requirements for the 2022/2023 crop as soon as possible, as prices will likely rise further.


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