Frontrunner - 14th November 2024

WHEAT

• Markets in decline

The US political landscape and beneficial weather have combined to push wheat markets lower in recent days. UK prices suffered from sterling strength, leaving London wheat futures nearing their contract lows.

President Trump says he will be able to bring a prompt end to the Russian/Ukraine war, which, if achievable, would remove the risk to Black Sea wheat supplies which continue to provide the world's major importers with the cheapest available wheat.

There are concerns that the US might also introduce tariffs on imported goods into the US, particularly from China, which might then see China turn to alternative sources for their significant soyabean supply and other agricultural commodities.

From a fundamental perspective, much of the US winter wheat belt – including major producing states Texas, Kansas and Oklahoma - enjoyed heavy rainfall which boosted 2025 production prospects.

Prior to this, the wheat area in drought had been expanding and the earliest US winter wheat condition index was historically low, but rain has subsequently led to a marked improvement. The winter wheat is now seen 44% rated 'good/excellent', up from 41% the previous week with planting now put four points up on the week at 91% complete.

• Sterling not helping

Despite a quarter percentage cut in the UK base rate last week, sterling continues to attract investors and compared to the euro it reached its highest levels since early April 2022. The appreciation in sterling since harvest is about 4.5% - making imported supplies more affordable has been an additional bearish factor that has impacted domestic wheat values.

Fears for a second consecutive low UK wheat crop in 2025 have eased given the settled weather pattern continuing into this week and could see the domestic supply in surplus next season. The current crop year prices continue to reflect import costs, although most consumers have good cover into the new year which leaves nearby prices discounted for both feed and bread making.

Meanwhile in France, winter wheat planting jumped to 62% complete, although only 35% has emerged. More forecast adverse weather has led some to suggest the French 2025 crop will again be compromised like it was in 2024.

• Dry in Russia

Dry soil conditions persist in Russia and Ukraine where winter wheat planting topped 97% of the intended area.

For Russia, however, there is potential for the 2025 crop to be lower again with winter wheat planting estimated to fall to 15.4 million hectares. This would be the lowest since 2018/19. Despite this, traders expect an increase in spring drilling to compensate to a degree and markets have not yet reacted to the likely lower crop.

Russian wheat exporters continue to offer wheat cheaply in export markets despite the Ministry of Agriculture of the Russian Federation recommending a floor price of $245/t for November. Offers this week range between $224-$227/t FOB which is about $4/t down on last week, although November exports are expected to fall below October.

Analysts marked their surplus estimates for this season to 45 million tonnes – three million tonnes below the United States Department of Agriculture's (USDA) estimate in last week's World Agricultural Supply and Demand Estimates (WASDE) report.

BARLEY

• Feed barley demand

Feed barley continues to find good levels of domestic demand at around £30/t under feed wheat in all areas. Feed barley inclusion in all rations is maximised at these discounts. We have seen some very modest quantities of feed barley export trade this week, but the supply side of barley feels heavy.

• Feed barley applied in malting barley market

Pressure on the feed barley market continues to be applied with an extremely muted malting barley market, especially in the nearby months. With small malting premiums and little nearby malting barley demand, many growers who require movement for cash flow are selling spring barley as feed.

• Marketing opportunities

Looking forward to next year, Frontier is offering a range of marketing options to help growers manage risk and market their malting barley crops. Guaranteed minimum premium contracts, futures related distilling contracts and malting barley pools are just a selection of the contracts that are offered. 

OILSEED RAPE

• Australian canola harvest progresses, palm oil premiums heightened and soybean plantings continue

The Australian canola harvest is underway, with an estimated production of around 6.5 million tonnes. However, early estimates are now trending towards the six million tonne mark.

There is an unusual large price premium for palm oil over other vegetable oils due to the sizeable setback in production and rising Asian domestic usage. This has prompted European importers to shift to alternatives where nearby vegetable oils are tight, this is creating price buoyancy. This situation could relax in the new year as other sources of rapeseed and soybeans become available to alleviate the pressure.

By the end of last week, Brazil's soybean plantings for the 2024/25 season have reached 67% of the total expected area. Planting and crop development is in progress without any major problems throughout the country. For the time being, this will remain neutral to the market unless further weather issues arise.

 PULSES

• Beans

With little market movement, feed beans continue to look expensive against other protein sources. UK feed beans still see competition in the export market from the Baltic regions due to their poor-quality crop, which are now seeking alternative markets to the usual human consumption markets in Egypt. We're seeing mixed reports about the quality of the Australian bean harvest, with the first three human consumption vessels due to arrive in Egypt pre-Christmas. The quality and what that means for UK beans will be one to watch.

• Peas

Canadian peas have traded at $100/t cheaper to UK peas, which means there's little opportunity for export of micronising peas. With domestic users are also bought up for the foreseeable, the premiums seen at the beginning of the crop have significantly reduce and will continue to be eroded. 

 FERTILISER

• Urea/AN

The daily downturn in urea markets last week - caused mainly in anticipation of the latest Indian tender but also due to growing producer stocks - hit the floor and are now recovering.

This latest tender deadline for one million tonnes of urea passed, with India unusually acting very swiftly to issue counter offers. This may be due to the tight shipment window of 25^th December but could also be a sign that the country doesn't have enough tonnage to meet requirements and could therefore return to issue yet another tender before the start of 2025.

Prices in major producing countries did decline but didn't have time to take breath as buyers jumped in for cover, taking advantage of the lower offer levels and improved exchange rates. Much of the product accepted by India will again be prilled urea, not granular.

Egyptian suppliers, whilst not competing with other countries at the levels that work into India for granular urea, have had a good short/sharp run. Over 100,000 tonnes was sold in the past 48 hours, some of this (maximum 10%) could arrive into the UK.

However, if Europe still requires granular product before the usage period, then the window to cover this volume is getting tight and the market is likely to rise back up again following the Indian tender settlement in the coming days/weeks. All eyes are now on how high demand will be and when it is needed, as global nitrate markets are running behind traditional volume levels.

Coupled with this demand, geopolitical situations in the Middle East, global energy prices and the potential for another Indian tender in 2024 mean its plausible that levels won't drop anytime soon.

European AN markets aren't reacting to any urea declines and are unlikely to, given the continued high production costs. This week, more producers in Europe announced financial losses and reductions or curtailments on output. High costs are attributed to volatile natural gas prices in Europe and firm global ammonia levels.

Ammonium nitrate manufactures, mainly across Europe and the UK, remains steady and at a fraction of production rates compared to previous years. Whilst this is allowing supply for current order books to be fulfilled in the corresponding nations, it isn't contributing to any stock build up as we head into 2025 and ever closer to usage periods.

Demand for AN has been absent whilst growers drill their crops and analyse what requirements they will need for the season ahead. However, confidence in producers to increase production rates is challenging to find, whilst raw material costs are high and look set to remain. Therefore, the expected demand will return to a market that is already showing signs of pressure.

Growers in Europe and the UK have restricted product choice for quality AN, unless we see a sizable drop in energy prices which is unlikely as we move into colder conditions. Growers in the UK are in a unique situation in comparison to those in Europe, as today they have the option to buy domestically produced AN from CF Fertilisers for January or February delivery.

• Liquid/UAN

As UAN values continue to follow the traditional trend of tracking the AN market, there have been no changes to UAN values in recent weeks despite the fluctuations witnessed in urea pricing.

Today's UAN terms - for both autumn/winter tank fill and spring delivery - continue to offer competitive value against AN based systems, particularly in a nitrogen and sulphur programme. A full portfolio of grades are available, however, volumes are limited for the tank fill delivery period.

Those with tank capacity and a known requirement for the season, or those who have drilled a larger area of winter cereals than initially expected, are encouraged to review their total requirements and contact their local Frontier representative to discuss additional volumes required.

• Straights/PKs

Increased potash supplies out of Laos, Asia, have assisted markets to fall back to levels not witnessed since the summer of 2021.

With Chinese backing, Laos has tapped deeper into its vast reserves of an estimated 133 billion tonnes and expanded its export programmes to many global customers, including a new rail link into China which takes 65 million tonnes per year.

If the project remains successful then Laos could very soon become the third largest global supplier after Russia and Canada. The drop in price has forced global demand up which could slightly lift prices into quarter one 2025.

Phosphate prices are stable and global demand is generally low, which coincides with production and supply issues in the USA following recent storms, so any downside looks limited in the short term.

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