Frontrunner - 15th February 2019

WHEAT

• Global prices move lower

Chicago wheat futures traded at their lowest level since the start of 2019 yesterday and Kansas Corn was no different. Both markets were forced lower by disappointing export data. US wheat sales currently sit 8% behind this time last year as they've struggled to compete with cheap Russian wheat.

Matif also closed €3/t lower, sinking to seven-month lows despite 600,000mt of French wheat trading into Algeria yesterday afternoon. The volume traded some $15/t below their previous purchase which left Matif looking over-valued.

• Lack of demand weighs on UK prices

UK futures plunged sharply towards the close of business yesterday and have continued to slide weaker today. Consumer demand for old crop and new crop wheat remains subdued as feed compounders re-formulate to include more significant volumes of cheap barley and maize. Combined with weaker global markets, the net effect was a £5/t downward movement for London futures. Physical prices somewhat mirrored futures and it may be that this downward pressure will eventually spark the interest of consumer buyers; but for now it's difficult to predict where the support will come from.

BARLEY

• World barley market under pressure

Once again we saw significant price falls in feed barley this week. The tender to Tunisia for 75,000 tonnes of barley was significantly oversubscribed and was filled with barley that will most likely be from France and Argentina. The tender for feed barley to Jordan also saw a number of offers to a destination that often struggles to attract bids. In the end nothing was bought, much to the dismay of the world barley trade. Prices fell as a result, even in France where some of the Tunisian tender is likely to be from.

• UK barley prices also fall

UK prices have also come under pressure as benign winter weather conditions did little to help compounder demand in the west of the country. Barley, however, does remain at a significant discount to feed wheat and should look attractive in formulations going forward during spring time. End users will have benefitted for not buying too much cover forward and the recent market decline has encouraged buyers to only buy when they really need to.

• Malting barley market quiet

With little new demand for crop '18 malting barley in the UK and the export programme drawing to a close, malting barley values continue to slip away. Weather conditions are making growers think about nitrogen applications on winter barley and drilling spring barley, all significantly earlier than last season. End users remain relaxed about making further purchases for crop '19 and the market therefore remains neglected. Brexit uncertainty certainly does not help in this respect as traders remain unsure about the position of the UK in the European supply and demand mechanism.

​OILSEED RAPE

• Stable exchange rates

The value of sterling, and its affect on UK commodity values, is very much in our minds as the country moves into the final few weeks before we are due to exit the EU at the end of March. However, looking at the sterling/euro exchange rate, the last 18 months has produced a remarkably stable picture with our currency remaining relatively strong. Since September 2017, the exchange rate has hovered around the 89p/1 euro mark, never going below 86p/1 euro and peaking at 91p/1 euro. We currently sit at 88p/1 euro. This environment might change going forward but in recently the value of our currency has not been a major factor in determining our rapeseed prices.

• Weak fundamentals

This week has seen a £5/t drop in domestic prices weighed down by a combination of plant shut downs for maintenance, processors switching into crushing soybeans and significant arrivals of Australian seed. All of this is pointing towards much higher European year ending stocks. With a £10/t drop from the last old crop positions to new crop harvest levels there is likely to be a scramble to avoid being the long holder. This points towards weaker markets during the summer months. Further afield the US/China trade talks appear to be no closer to a conclusion either way with rumours circulating in the last few days that the Chinese have bought 2 million tonnes of Brazilian soybeans. Suddenly USDA export projections look very optimistic and year ending stock numbers will have to go higher.

 PULSES

• Demand for de-hulling

Little to report this week with the better quality human consumption markets largely traded out for the season and limited demand for beans into the animal feed compound sector as alternative protein sources price themselves into rations. There has been a small lift in feed bean values in recent days, driven by the continuing demand for supplies of de-hulled beans for the fish feed market.

 FERTILISER

• Nitrogen

The gap in price between imported and UK produced nitrogen got a little wider this week as importers reduced prices to move stock and reflect the improvement in exchange rates. With the current weather, demand is very high for product on farm and logistics are already under pressure. Please discuss requirements and product selection with your Frontier contact.

Urea continues to weaken globally with UK stock holders reflecting this by dropping prices again. If domestic prices reduce much more, export to mainland Europe may become viable. Urea users that still need to purchase are advised to order before stocks in regional locations sell out.

• MOP

Prices remain stable as demand moves up another level. Shippers are replacing stocks but some delays due to exchanges rates have caused small windows of no supply in certain ports.

Polysulphate, PotashPlus and the PK Plus compound continue to grow as farmers look to decouple nitrogen and sulphur products/systems. Please discuss options and requirements. Again it is worth speaking to your Frontier contact.

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