Frontrunner - 15th August 2024

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WHEAT

• USDA trims US wheat production and world stocks

On Monday this week the United States Department of Agriculture (USDA) published its August World Agricultural Supply Demands Estimate (WASDE). Traders expected to see a slight increase in US wheat production, but despite seeing a higher yield, the USDA also saw a smaller harvested area. This left US wheat production dropping from the previous estimate of 54.66 million tonnes to 53.93 million tonnes.

The USDA also made a modest production estimate cut for the EU, with increases for Australia, Ukraine and Kazakhstan. World production is still seen rising by 2.1 million tonnes on the July report, which is 8.5 million tonnes up on last year and a record 798.28 million tonnes. World use is four million tonnes up on the previous report and five million tonnes up on last year at a record 804 million tonnes. Year-end stocks are 600,000 tonnes lower than previous and will be 5.7 million tonnes down on the year. This will be the fifth consecutive year we have seen a fall in world wheat stocks and will be the lowest for nine years.

The corn balance sheet is the opposite to wheat – lower world production by five million tonnes to 1.225 billion tonnes, which is mostly offset by a cut in consumption of four million tonnes, to 1.218 billion tonnes. End stocks are 1.7 million tonnes down on previous and three million down on the year at 310.17 million tonnes. Ukraine corn production was cut by only 500,000 tonnes, to 27.2 million tonnes, when other estimates are as low as 23 million tonnes. EU corn production is cut by 3.5 million tonnes to 60.5 million tonnes.

Despite the friendly USDA data for wheat, futures prices subsequently continued to fall, with the Paris market setting new contract lows.

• Russia dampens wheat prices

This week saw mixed views on Russian wheat production for 2024. Leading Black Sea research firm, SovEcon, cut its previous estimate from 84.7 million tonnes to 82.9 million tonnes - similar to the USDA estimate of 83 million tonnes - compared with last year's 91.5 million tonnes. In contrast, Russia's leading agricultural consultancy, IKAR, raised its estimate by 600,000 tonnes to 83.8 million tonnes, with exports at 44.5 million tonnes. The USDA exports estimate looks too optimistic at 48 million tonnes, however last season exports were 55.5 million tonnes. Despite a smaller crop than last year and there being less to export, Russian shippers continue to trade at lower prices. Russian export prices are reported to have traded below $220 FOB for 12.5% milling quality, the sterling equivalent of £171.00 port-side.

Having tendered for up to 3.8 million tonnes of wheat through to April 2025 delivery, Egypt has only bought 280,000 tonnes for October / November delivery. The country bought three cargoes from Ukraine and two from Bulgaria, with rumours circulating that it is in private negotiations to buy up to 30 further wheat cargoes, with Russia thought to be the likely primary seller.

• UK wheat harvest powers ahead

With the UK enjoying its warmest day of the year this week, wheat harvesting continued at a fast rate, spreading northwards. On average, over half the crop is now safely gathered. There are clear trends developing, with Group 1 wheat protein mostly on a par with last year, but with proteins notably lower on the year on Group 2, 3 and 4 wheat. A large percentage of these types will fail to meet the most basic protein specification for biscuit and low milling grades. Hagberg and specific weight on average are okay, although tests so far show some examples as low as 68 bushels.

Overall, UK production estimates remain in a wide range, from 10 to 11.5 million tonnes. The USDA left its UK wheat production estimate unchanged on last month, at 10.85 million tonnes. However, independent analysts, Strategie Grains, increased its estimate to 11.44 million tonnes, from 10.46 million tonnes previously, with a larger planted area.

BARLEY

• Feed barley holds its value

While feed wheat futures have dropped this week, feed barley has held its value and gone up in the spot positions. Compounders still see feed barley as better value than feed wheat - it also offers a good source of fibre, as other comparable products are in shorter supply and therefore barley inclusion in feed rations will remain high.

• Malting barley premiums drop heavily

Farm sample results of spring barley are showing unusually low nitrogen in general, bold grain and low screenings. South of the Humber, grain is currently trending ever drier as harvest ramps up. Premiums are as low as £12/t in areas that are distant from maltings. This will limit the desire to send these malting grades into the malting barley supply chain. There are plentiful supplies of Planet and Laureate without the need for the less common varieties, such as Skyway and Diablo, which may well be marketed as feed barley. 

OILSEED RAPE

• Rapeseed values remain volatile but lack direction

The market is battling with a theoretically bullish rapeseed supply and demand versus negativity in the soybean market. Rapeseed crops across Europe have underperformed - leading to the smallest crop in recent history – in contrast to the large US soybean crop which has been subject to very favourable growing conditions. Furthermore, a weaker than expected demand picture into the US biofuels market and China are further pushing that market down, which is softening the whole oilseeds complex.

UK harvest is now near completion, with only areas of Scotland left to harvest. Whilst reported yields are relatively low, minimal flea beetle activity has been reported so far which should be positive for those looking to plant rapeseed again in the coming weeks.

 PULSES

• Demand picture remains subdued

The bean harvest continued this week, with early yields ranging from 3.7 to 4.5t/h. Feed bean prices have maintained a premium of around £40 per tonne over London wheat futures. However, demand remains a challenge as Baltic beans are being offered at lower prices and domestic compounders still consider beans too costly at these elevated premiums, especially in comparison to other feed alternatives such as soybeans, which have fallen to a four-year low.

In contrast, there is strong nearby demand for high-quality human consumption beans, with a £20 premium over feed beans. These beans must have low levels of bruchid beetle damage and a consistent beige colour, with a green tinge. However, this demand is expected to diminish once the Baltic harvest becomes available in a few weeks.

Pea yields remain encouraging, with large blue peas that are suitable for micronizing valued around £370 ex farm, while feed peas are valued at similar levels to feed beans.

 FERTILISER

• Urea/AN

The good weather in the UK has helped harvest progress well across the entire length of the country. Yields and quality are variable on all crops, with early indications showing a potential protein shortfall in milling wheats.

Demand for fertiliser at this time of year is generally low, but we are seeing some up-side risk as gas prices firm on the back of the situation in Ukraine and Russia. The leading European benchmark gas price – Dutch TTF Gas – continued to firm this week, exceeding the €40 mark. This price level was last seen back in July 2021, when the prices doubled to over €80 by the end of September and spiked at €340 in August 2022. This is something to watch, especially given the rise is during the summer months, as gas prices tend to be higher in winter due to increased demand for heating.

Current offers in the UK for imported and UK AN remain unchanged since last week, with producers watching the gas and ammonia markets for the next move. Urea markets are flat whilst awaiting information regarding the Indian tender, which is expected later this week. Knowing the volumes India wants to cover will give further market direction once all bids are confirmed.

• UAN

As referenced in last week's report, the expected arrival of a UAN vessel into an East Anglian port has increased the volume of finished nitrogen and nitrogen sulphur grades delivered to on-farm tank storage in recent days. Product for spot delivery from all UAN suppliers remains available - including NP and NPK grades - for growers planning to establish OSR in the coming weeks. The current UAN terms available for autumn tank fill and spring delivery offer growers with a known requirement a competitive value compared to solid pricing. However, it must be noted that although terms remain unchanged from their initial release earlier this summer, volumes available are limited.

• Straights/PKs/NPKs

Demand is building as fields are cleared and we look forward into next season. Soil sampling will be high on the list of jobs as we try and see what effect the recent season's weather has had on P and especially K indexes. Speak to your local Frontier contact for help, or visit www.frontierag.co.uk/soilhealth.

There have been no changes since last week to the P and K market, with talk of phosphates firming again and MOP remaining flat.

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