Frontrunner - 16th June 2023

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WHEAT

• USDA see record 2023 wheat crop

The United States Department of Agriculture (USDA) published revisions to its World Agricultural Supply and Demand Estimates (WASDE) report late last Friday afternoon. There was a notable jump in its world wheat production estimate, which it now sees rising to over 800 million tonnes. This is 10.4 million tonnes up on last month and 12 million tonnes up on last year. It came as a surprise to many that the USDA did not cut production estimates for areas where adverse weather may reduce output potential. For example, the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) recently cut its country's production potential by a third on last year's figure to 26.2 million tonnes due to the expected negative impact on yields from the El Nino weather. However, the USDA left its estimate for Australia unchanged at 29 million tonnes. It also increased its EU wheat production forecast by 1.5 million tonnes, whilst others are cutting estimates due to prolonged dryness across northern Europe. Weather over the next two months will be key for most Northern Hemisphere crops and will need monitoring to see if the USDA's optimistic outlook can be realised.

Wheat markets found additional price support from the US, where corn production potential is being compromised by prolonged dryness. The USDA believes US farmers will achieve record yields, but weekly crop ratings are in decline with a three-point drop this week to 61% 'good/excellent'. This compares to 72% rated 'good/excellent' at this stage last year.

• Cuts to EU wheat production

The continued dryness affecting northern Europe led European trade association Coceral to cut its combined EU and UK 2023 wheat production estimate to 142.4 million tonnes. Independent business analysts, Stratégie Grains, also cut its 2023 EU wheat production estimate by 1.3 million tonnes on last month to a total of 128.7 million tonnes. However, this is still 3.6 million tonnes up on the year. These revisions helped boost buying interest and London November 2023 wheat futures back above £200/t - their highest since the end of April.

A three-point drop in French winter wheat crop ratings to 88% rated 'good/excellent' highlighted yield potential moving backwards but crop ratings remain historically high. This time last year the French winter wheat crop rating was just 66%. EU wheat exports to 11^th June climbed to 29.97 million tonnes - up 1.1 million tonnes on the week and 3.5 million tonnes on the same period last year. With most analysts' expectations of exports to be below 30 million tonnes, it looks like these early estimates will be exceeded by a reasonable margin.

Lower 2023 production estimates as a result of the dry weather have led to lower expected carryover stocks. This leaves a supply outlook that is tighter than previously expected.

• Black Sea export doubts continue

The week, President Putin announced that Russia was considering withdrawing from the Black Sea export deal when it expires on 17^th July. This cast doubt over the longevity of the export deal that has allowed Ukraine to continue shipping wheat and other grains from some of its Black Sea ports over the past 11 months. The President expressed concerns that EU sanctions are preventing the free flow of Russian exports. However, with Russia expected to ship three million tonnes of wheat in June - taking the country's seasons tally to a record 45 million tonnes - it is difficult to believe that this commodity is part of those concerns. Putin also observed that most Ukrainian grain shipments were ending up in the EU rather than poor nations, announcing that if the deal is not renewed then Russia would provide grain for poor nations free of charge. 

BARLEY

• Old crop activity increases, albeit from a low base

Old crop domestic demand from compounders has been quiet this week with buying mainly on a hand-to-mouth basis. This dynamic is possibly due to prices declining almost every week since February. During this decline feed barley has lost up to 20% of its value. Short covering by the trade has added modest demand. Overall, the pace of farm selling for crop '22 has been slow and there may be a significant tonnage yet to be marketed for this season.

• UK exports are un-competitive

UK export is still struggling to be competitive against cheap Russian and Ukrainian grain that is entering in increasing quantities via road and rail. These alternative supply routes may dampen any effects that a potential closing of the Russian and Ukraine grain corridor may have on the 17^th July. With regards to demand, if China returns to the market for French grain this year we could see a material reduction in European surpluses. This could bring European export prices closer to UK levels.

• New crop demand coming online
  

OILSEED RAPE

• Oilseeds complex finds strength

This week, the wider oilseeds market (including rapeseed, soybeans, palm and sun seeds) saw strong gains for the second week in a row. The weather in northern Europe is increasingly dry and rapeseed yields are starting to see potential damage, particularly in Scandinavia and the Baltics. Dry conditions are also beginning to cause concern in northern France, Germany and Poland. Despite this, the EU crop conditions remain strong, with many estimates over 20 million tonnes. Dry weather for US soybeans crops is also giving the market support.

Policy change was big news again this week, with the US Environmental Protection Agency (EPA) set to release mandates on renewable fuel blending levels, which includes vegetable oil derived from soybeans, canola and others. This announcement is of particular importance as huge investment has been made into increasing the production capacity of biofuels in the US. The release of the mandate has been delayed until 22^nd June; however, the market took this as a bullish message with fund managers joining in.

 FERTILISER

• AN/urea

Ammonium nitrate (AN) production in the UK and Europe has begun, but mainly to satisfy domestic demand as producers remain vigilant of the continuation of rising gas prices. The cost of natural gas in the UK has increased over 70% from £0.57p/therm to £0.98p/therm since the UK market started its new season campaign on 23rd May. Energy levels are firmer again into quarter four with December 2023 at approximately £1.45p/therm. Producers will remain cautious to reflect raw material costs. We advise growers to discuss forward offers currently available to them on UK domestic product. With a lack of quality imported products available and traditional suppliers unable to offer prices forward, the current offer from CF Fertilisers for January to February delivery - at a small carry to the first posted June price - should be seriously considered.

India returned to the urea market this week with a new tender for 800,000 tonnes and a very tight shipment by 17^th July. Although the country initially received offers on over two million tonnes, early reports say it can only cover 600,000 tonnes due to a combination of stocks already held in India, the tight shipment window and the prices put forward being lower than most producers expected. The agreed tonnage will most likely be sourced from stocks held in Russia and the Middle East, with little interest from China as it would see a better financial return from its domestic market. China represents 30% of all global production and, given minimal activity from them with this tender, it would suggest a new floor price has been set. Producers that have now de-stocked will be looking to increase levels in the coming days and weeks.

• Liquid/UAN

Foliar products applied at growth stage 69-75 - aimed at increasing protein in milling wheat - have seen an increase in demand in recent days as the application window moves closer. Where contracts allow, growers with a requirement for these products, either in an intermediate bulk container (IBC) or bulk delivery, should contact their Frontier representative to discuss available options. Offers of urea ammonium nitrate for summer and autumn delivery remain unchanged, following the release of terms earlier this month. A full portfolio of grades are available across the UK marketplace for growers looking to secure their tank fill volumes on this first offering.

• PKs

Markets have been correcting downward to levels that are now starting to attract interest. Diammonium phosphate (DAP) and triple superphosphate (TSP) levels have decreased slightly again this week, prompting some growers to purchase. Potash and polysulphate remain unchanged.

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.