Frontrunner - 14th July 2023

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WHEAT

• USDA see larger US crops

This week the United States Department of Agriculture (USDA) published its July World Agricultural Supply and Demand Estimates (WASDE) report. It added weight and area to both US wheat and corn crops. The increasing supply of these crops triggered a wave of selling and futures prices went back down to early June levels.

US wheat and corn markets have struggled for traction since the USDA released its Stocks and Acreage report at the end of June. This report surprised many with a 2.2-million-acre jump from previous estimates for corn acres planted by US farmers. The expected harvested area is up 2.2 million acres, but this week the USDA put corn yields at a surprising 177.5 bushels per acre. This is 4.2 bushels per acre up on last year despite crop ratings being currently at 55% 'good/excellent'. Last year, ratings were higher at 64% 'good/excellent. Beneficial rain leaves an optimistic view that crops will continue to improve. For US wheat, the harvested area is seen 600,000 acres higher than last month, up to a total of 37.7 million acres. Yields are also up 1.2 bushels per acre to a total of 46.1 bushels per acre. Although yield is still down on last year, the overall US wheat crop is seen two million tonnes higher than last month at 47.33 million tonnes and stocks are up 900,000 tonnes to 16.12 million tonnes. Chicago Board of Trade (CBOT) wheat futures fell around 4% after the report, despite a bullish set of data for the world wheat balance sheet.

Cuts from last month's figures across several areas offset the US wheat production increases. Argentina is down two million tonnes to 17.5million tonnes. Canada down is two million tonnes to 35 million tonnes. The EU is down 2.5 million tonnes. All this leaves overall world output 3.5 million tonnes down from the previous report. Stocks are almost four million tonnes down and world stocks 2.8 million tonnes down on the year.

• EU wheat crop keeps shrinking

Early cut EU wheat yields and quality paint a mixed picture. Analysts and official bodies see the 2023 EU wheat production potential lower than previous estimates. This week, analyst group Stratégie Grains cut 2.5 million tonnes from its previous estimate, taking the crop down to 126.17 million tonnes, which is now just 1.1 million tonnes up on last year. This will leave a less burdensome stock and a more realistic export target of 30.1 million tonnes, which is 1.3 million tonnes below what was achieved during the 2022-23 season. It is worth bearing in mind that 2022-23 production volumes were realised with the benefit of a fully functioning Black Sea export corridor for Ukrainian supplies, as well as a record wheat export programme for Russia - around 46 million tonnes. With the current extension to the deal due to end on the 17^th July, it will become apparent whether Russia will see through its threats to withdraw from the deal.

• UK heavy old crop

The nearby UK wheat market continues to be weighed down by substantial old crop supplies and remains heavily discounted to forward prices. A lack of any tangible spot export demand means those with smaller volume consumer demand have been able to take advantage of the cheap wheat currently available. Despite this, farmer selling has slowed. The UK old crop wheat carryover could be up to as much as one million tonnes in excess of what domestic consumers will need from now until new crop arrives. However, given the inclement weather patterns across the country, the start of the 2023 wheat harvest could well be delayed beyond expectations and provide some old crop selling opportunities.

The USDA made small revisions to its UK 2023 balance sheet and cut production by 200,000 tonnes to a total of 15.5 million tonnes. However, it also estimated that UK 2023-24 wheat exports will reach 1.9 million tonnes, but that might prove optimistic without seeing any strong demand for UK wheat. This demand could, in due course, come from Spain where prolonged heat has cut the country's domestic grain output and increased its import needs. However, Ukrainian supplies are currently flooding the Spanish market. Stratégie Grains has a less upbeat UK wheat production number at 15.17 million tonnes, which leaves a lighter balance sheet.

BARLEY

• Barley harvest underway

This week the winter barley harvest started in many parts of England. Progress has been sporadic with showers of rain slowing down any significant progress. Early yields look positive on feed barley with bushel weights close to the 63-65kg average. Given the showers we have seen, moisture levels are higher compared to last year's exceptionally dry harvest. More rain is forecast into the weekend so we don't expect to see much more harvest progress until early next week.

• Export demand still muted

The UK has connected on a small volume of export trade this week, but overall demand remains limited. UK values remain too high to connect on any export trade to the Spanish market which continues to source imports from cheaper origins - notably from Brazilian corn. There has been some domestic purchasing with compounders and trade shorts looking to cover positions for October onwards with feed barley's discount to wheat at 20/t-£21/t. With the lack of harvest export demand, farm values are heavily discounted for this position compared to forward prices. 

OILSEED RAPE

• Rapeseed market supported on the back of global weather

This week UK rapeseed prices have seen gains of over £25/t as global weather casts doubts over oilseed production figures. In the US, widespread drought has resulted in some of the worst soybean crop conditions at this point in the season for over a decade. In Canada, similar conditions are prompting recent memories of the 21/22 crop year where final Canadian production yielded around 35% less than initial expectations.

Normally at this time of year the European rapeseed harvest would add some pressure to the markets as harvest sellers look to move and price their produce. However, due to European rapeseed's relative discounts to both soybeans and Canadian canola, it is making it impossible for the market to ignore the difficulties within the North American oilseed's crops, as previously mentioned.

The trade also had a USDA WASDE report to digest this week, which interestingly kept US soybean yields at the same level as last month's report and reduced EU rapeseed production to 20.2 million tonnes. Initially markets reacted negatively to this information, particularly in soybeans where the trade expected yield cuts. However, preceding trading sessions shrugged this off and recorded gains to wipe out the immediate reaction to the report.

As for the UK harvest, there is very little to report so far with most activity looking to get started around the 19^th of July. Patchy rains look set to cause challenges but otherwise there is a generally positive feeling about yield potential for remaining crops. 

 PULSES

• Beans

With old crop trade almost concluded and with business being few and far between, the market is anticipating new crop harvest. We're due to see some of the earliest bean crop in three weeks' time and there's an increasing confidence that volume will be seen in the second half of August. Generally, the crop is looking well and we don't expect any major surprises this year. The weather has been milder and a little wetter than usual but we should start to see more sunshine and dry conditions as we approach the end of July and head into August. These conditions will help crop development. UK and European demand for feed is expected to continue to increase as it did this season, which means the market will be dominated by animal feed trade. Human consumption trade will be affected by Egypt's continued foreign exchange shortage, coupled with uncertainty around the quality of the UK bean crop.

• Peas

There has been little change on the peas market but there has been an interesting development in the China and Russia pea agreement. Chinese buyers are looking to do more business with Russian sellers, which could leave a large Canadian crop looking for a new home. However, we don't expect this to have an immediate impact on the domestic and EU market as there still isn't significant volume traded between the two countries as they struggle to iron out the trade barriers. However, this is a trend shift to be aware of going into the future. Overall, domestically it is estimated that there will be less peas harvested overall but, if estimates are accurate, there may be an increase in yellow peas this year. 

 FERTILISER

• AN/urea

Urea markets continue to gradually creep up as tonnage is released by North African producers for August movement. India is waiting in the wings to issue another tender, although some reports suggest this might be put on hold for a few weeks.

Nitrogen supply in Europe continues to cause concern due to the fluctuations in natural gas markets which subsequently affects producer confidence on price stability for both spot and forward months. This makes it difficult to contend with UK domestic production, particularly with the current January/February 2024 offer from CF Fertilisers.

• Liquid

Tank fill terms for UAN remain available in the UK marketplace. These terms offer growers the opportunity to fill on farm storage in the coming months, with a full portfolio of nitrogen and nitrogen Sulphur grades available to suit planned cropping. However, it must be noted that due to significant uptake of these offers in recent weeks, volumes for summer delivery are now very limited.

As winter barley harvest progresses across the country, product required for oilseed rape establishment in the coming weeks is available in either bulk or IBCs. A full range of nitrogen phosphate clear solution compound grades are offered depending on levels of nutrient required. Please speak to your Frontier representative about the full portfolio of products available.

• PKs

The potash market has now stabilised since the reduction in prices a few weeks ago and the outlook remains stable to firm moving forward. Polysulphate offers for spot delivery remain good value, with the view that the price will increase month by month into autumn.

Phosphates are still relatively weak but appear to have reached the bottom of the market and any further changes are likely to be minimal and may not happen in time for usage, in particular DAP for OSR establishment.

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.