Frontrunner - 14th February 2020

WHEAT

• US markets lower

US wheat futures markets eased again this week, dropping to price levels not seen since December.This drew Black Sea and European markets lower too. There is still no evidence of any US wheat export business to China following the signing in mid-January of 'phase one' of the China/US trade deal, and US wheat is not competing for business in other markets such as North Africa.

This week, Egypt held a tender for wheat to be supplied during April. They bought 180,000 tonnes from both Russia and Romania at prices that, on average, were $6/t below their previous tender from France two weeks ago. Next week, the United States Department of Agriculture (USDA) will host its Agricultural Outlook Forum. There is hope that this may provide more clarity on what wheat China may undertake to purchase from the US. Nevertheless, the coronavirus may bring plans to a halt and maintain the negative market sentiment.

• Featureless USDA report

Each month, the USDA publishes its World Supply and Demand Estimates, and traders watch closely for any notable changes that may influence wheat prices. However, these reports have provided minimal amendments to supply or demand in recent months and, subsequently, have not triggered dramatic price moves or new price trends. This week's report, published on Tuesday, was no exception. World production dropped 440,000 tonnes to 763.95 million tonnes, consumption dropped 180,000 tonnes to 754.19 million tonnes and, year-end stocks were down just 50,000 tonnes to 288.030 million tonnes – still a record high.

• UK prices down despite continued drilling woes

In line with world prices, UK wheat lost value this week, not helped by sterling strength versus the euro. Aside from a temporary blip following the general election result in December, sterling has rallied to levels not seen since May 2017. Sterling strength enables imported wheat to be bought more cheaply and therefore has a negative impact on domestic prices.

Further significant rain is expected this weekend, with Storm Dennis set to hit the UK. This may well be enough to draw a line through further winter wheat drilling. The extent of the possible UK wheat shortfall next season may be highlighted in reports that we expect to see published next week. Basic Payment Scheme data for the 2019 crop may or may not complement the drilled area estimates from the Department for Environment, Food and Rural Affairs (DEFRA). This could determine a variance in the 2019 UK wheat crop estimate and what might be available to carry over from this season. We should also see an amendment to the 'Early Bird' survey, conducted by Agriculture and Horticulture Development Board (AHDB), following a farmer resurvey. The first results, published last November, showed farmers' intentions to drill a wheat crop 9% lower than the previous year. Given the experience of many since then, this would seem an extremely optimistic figure and unfortunately a more significant drop could be expected.

BARLEY

•  Currency swings cause unstable market

This week, there was very little activity in the feed barley market, with volatility coming from the changes in currency. The value of sterling surged, hitting its highest level against the euro since December. This did little to help the UK's competitiveness with fresh barley exports. The move in sterling followed the Prime Minister's cabinet reshuffle, with markets anticipating increased government spending with the potential of increased interest rates.

• Pressure remains on malting premiums

There has been little change in the market as malting premiums continue to come under pressure. Extra haulage to malting barley destinations and small premiums are eroding most malting premium compared with feed in many areas around the UK. Any barley that does not meet full malting specification should be considered feed. 

​OILSEED RAPE

• Sterling strengthens

It has been a frustrating week on domestic OSR markets, with old crop values closing largely unchanged despite a €10/t jump since Monday in Paris futures values. Most of the benefit of this has been counteracted by the strong performance of sterling which appreciated by 2% against the euro during the week. New crop French futures have muted in recent days and, due to exchange rates. Physical prices are currently trading £3 per tonne lower into domestic homes.

• USDA report boosts South American crops

Markets need fresh news to create movement and the impact of the coronavirus appears to be factored in until this story develops into a new phase. Attention has therefore returned to market fundamentals. This week's report from the USDA boosted the Brazilian soybean crop by 2 million tonnes since the last report. Overall, South American production is now expected to be 7 million tonnes up on last year. This has inevitably led to the expectation of higher global stocks, which in turn has put the brakes on new season prices.

• Developing stories

Traders will monitor US export volumes to China when the 'phase one' deal becomes active on 15^th February. More specifically, they will check the weather in South America, which is reported as overly dry in the south and the east. In addition, traders will finally get involved in the annual process of trying to establish US spring planting intentions. These factors are likely to be the market movers over the coming weeks and months.

 PULSES

• Feed beans

Another week has seen another rise in the old crop feed bean market. This is academic to a certain extent, as there are so few parcels available. But, for those with feed beans left, values are ranging from £220 to £225 ex farm. Human consumption values are more static as Egyptian buyers prefer to buy the cheaper feed beans and clean them up using their own colour sorting and cleaning equipment.

• Delayed spring bean planting

New crop trading is very light as growers are still nervous about planting conditions for spring beans. With the current weather forecast, it looks as though there will be no spring beans planted until early March. With this uncertainty, bean values continue to follow wheat values and will do so until there is more certainty over the growing crop. 

 FERTILISER

• Nitrogen

This week would probably have been the first week of early applications of fertiliser, but Storm Ciara quickly put a stop to that. The final push to drill winter wheat was also knocked further back, with spring cropping now looking more likely. Every storm delays drilling further, consequently reducing fertiliser purchasing as farmers are not prepared to buy without the crop going in the ground. Nitrogen orders slowed this week, with storms also affecting the supply of raw materials coming into the UK, thus tightening the supply situation of all fertilisers. Nitrogen prices remained similar to last week, with urea firming. However, there has been very little consequence to the UK as farmers look to use ammonium nitrate instead of urea this season.

• PKs

Blenders are now pretty much flat out with regular spring demand, but expecting more to come. High winds have delayed some cargoes, reducing production capacity at a crucial time of year. Prices remain similar to last week, helped by currency at the end of the week. The expected demand will add to a normally difficult spring. 

 SEED

• High demand for spring seed

While some progress with winter wheat drilling has occurred in recent weeks, demand for spring seed remains at unprecedented levels and the availability of several crops is now limited. With Storms Ciara and Dennis likely to bring a close to winter drilling for many farms, the focus will shift to finalising spring cropping plans. Decisions on seed requirements should be prioritised and orders placed quickly, to maximise variety choice and ensure supply.

• Spring seed

Availability is now coming under pressure, with the list of variety options likely to shorten as we move towards March. The preferred malting and brewing varieties Laureate and RGT Planet have seen the strongest demand, alongside high yielding options like LG Diablo.

Following a 1000% increase in spring wheat seed sales in comparison to the 2018/19 season, supplies of seed are all but exhausted. Limited quantities of imported spring wheat seed may still be available but are likely to disappear quickly.

Stocks of spring oat seed, spring oilseed rape seed and linseed can still be found, but variety options are becoming limited and subject to change.

Seed for later harvesting crops such as maize and sugar or fodder beet are also seeing strong demand; availability remains good for the present.

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