Frontrunner - 19th August 2022

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WHEAT

• USDA triggers wheat price slide

London wheat futures fell to their lowest level for almost five months this week following the United States Department of Agriculture (USDA) World Agricultural Supply and Demand Estimates (WASDE) report published late last Friday afternoon. The USDA increased its estimate for world wheat production by eight million tonnes on last month's estimate to a new world total of 779.6 million tonnes. If realised, this will be a record.

The increase on the Russian wheat production estimate was the largest at 88 million tonnes from 81.5 million tonnes last month. Additionally, the Australian estimate increased three million tonnes to a new total of 33 million tonnes and the Chinese production estimate increased by three million tonnes to a new total of 138 million tonnes. This latter change is surprising as, at the beginning of the year, Chinese officials signalled the country's worst winter wheat condition historically and, despite drought and flooding, production will now be one million tonnes above last year.

Additional wheat market selling pressure is seen following improving Ukrainian Black Sea port export prospects, improving weather prospects for US corn and soybean crops and current global recession fears.

• Ukrainian exports step up

The export pace from the Black Sea continues to increase, adding weight to this week's bearish wheat market. Over 622,000 tonnes of grain and other agricultural produce is reported to have been shipped through the safe export corridor since 1^st August on a total of 25 vessels. The market now believes there will be improved cooperation between Ukraine, Russia, the UN and Turkey that will build export volumes.

This week, officials from Ukraine reported that September grain shipments could reach three million tonnes and that the Ukrainian wheat harvest is expected to reach 20 million tonnes of good quality wheat for their domestic needs. The USDA sees Ukrainian domestic use at 10.2 million tonnes and exports at 11 million tonnes, which the market views as a realistic estimation.

Analyst group SovEcon sees Russian wheat production climbing to a record 94.7 million tonnes, but it would seem the high yields have left stocks of low protein quality wheat being offered cheaply on export markets.

• Lower maize estimates but no help for wheat prices

Offsetting higher world wheat production estimates from the USDA were lower maize production estimates, but these have done little to arrest the slide in wheat futures prices this week. US yields were cut from 177 bu/ac to 175.4 bu/ac, leaving the crop 3.7 million tonnes lower than the previous estimate and 19 million tonnes down on the year. EU maize production estimates were cut by eight million tonnes down to a new total of 60 million tonnes, leaving world production at 1.179 billion tonnes - down 39 million tonnes on the year. World stocks will be five million tonnes down on the year at 306.68 million tonnes. However, other analysts see the EU maize crop closer to 55 million tonnes. French crop ratings dropped again this week to only 50% rated 'good/excellent'.

US Chicago Board of Trade (CBOT) wheat futures fell to their lowest since the beginning of February this year.

BARLEY

• Malting barley values under pressure

Malting barley values came under further pressure this week both on the domestic and export market. The market has now had time to digest the size and quality of the UK's excellent spring barley crop and maltsters believe that the current malting barley premiums have further downside. The domestic market looks to be well covered, especially in the pre-Christmas positions.

• Malting barley surpluses in Scandinavia and UK

In Scandinavia, harvest has progressed well this week and approximately 70% of its spring barley crop has now been cut. Yields and quality have been extremely good and now both Scandinavian and UK sellers are trying to sell their respective weighty surpluses of malting barley. With the European supply now looking far more comfortable, the ongoing uncertainty around malting barley demand continues.

• Surplus of malting specification barley necessitates selling as feed

The feed barley market had traded lower this week following the sizable fall on wheat futures in the second half of the week. Export markets remain very elusive and the market is generally quiet. With most spring barley seemingly making malting specification, farmers are understandably reluctant to sell parcels as feed today. However, in some areas, the falling malting premiums and distance from malting barley demand may ultimately result in full specification malting barley needing to move as feed.

• Critical to cool malting barley correctly

With temperatures now dropping, it is important to make sure that malting barley that is in store is being cooled to preserve malting quality. Some barley was cut at close to record temperatures and although most barley has been cut dry, it is important to remember that germination will also deteriorate if barley is not correctly cooled.

​OILSEED RAPE

• Weaker markets

It's been a torrid week on rapeseed markets with delivered Liverpool prices dropping by £50/t since the end of last week. This has been a continuation of the recent trend with current prices £225/t under the contract highs set on May 18th. This puts prices for this crop back to the levels that were trading just before the Russian invasion of Ukraine in February and at similar ex farm levels to values seen in the market this time last year.

• Global oilseeds stocks building

However, the global supply picture for oilseeds production and vegetable oil stock builds is much improved from 12 months ago and, on this basis, it is perhaps surprising that prices haven't moved lower over this period of time. Estimates for world 2022/23 oilseeds production are up 33.4 million tonnes year on year and stocks at the end of this season are seen at a four-year high. Building stocks and bullish markets don't normally go together.

• Bumper rapeseed crops

European rapeseed production is up almost 10% this year, which severely impacts the demand for imports, and Canada is predicted to have a canola crop of 19.7 million tonnes compared to last year's drought-ravaged 12.6-million-tonne crop. Weather in Australia has been favourable so far which, when coupled with a 10% increase in plantings, points towards another big crop that will be available for export in six months' time. Some traders are now saying that Ukrainian production could match last year's numbers and hopes for export corridors in the Black Sea are higher than they were a few months ago. Globally, there are likely to be an extra eight million tonnes of rapeseed to handle this season and there appears to be little justification for any increase in prices. 

 FERTILISER

• AN/urea

Global urea values remain firm with freight on board values ex Egypt trading at $755-770/t. The market is waiting on the next instalment of tenders from India and is seeing continued strong demand from South America. There is no doubt this will stimulate future trade for both urea and ammonium nitrate (AN), especially given the rocketing gas values which will flow through to production pricing in the autumn and winter. UK AN markets remain quiet as harvest progresses; however, European growers are buyers in the current market – around €1,100/t on farm. Currently, granular urea and treated urea offer UK customers excellent value in comparison to AN.

For liquid users, UAN is still available for late autumn and spring delivery. For those still to buy, we advise securing your requirements as soon as possible. Limus® Clear should be used when applying liquid to cropping especially given the current temperatures in the UK.

• PKs/straights

UK demand for potash and phosphates remains slow with many buyers reluctant to step in and procure their cropping requirements. However, it is important to point out that growers should ensure that offtakes are replaced for next year's cropping.

Pink straw is an issue being reported across many parts of the UK and is a sign of crops not returning nutrients back into the soil due to drought. A 10t/ha crop of wheat with straw removed will remove 70kg of phosphorous and 105kg of potassium and a 5t/ha crop of oilseed rape with straw removed will remove 75kg of phosphorous and 88kg of potassium.

Early senescence of these crops will remove more nutrients than normal so this should be factored into the equation for replacements. Growers should also take into consideration the high nutritional availability and water solubility of MOP and TSP products against other cheaper alternatives with poor water solubility and crop uptake. Crops remain in the ground for ten months and it is important that they are fed the best forms of available nutrition to prevent poor yields the following year and crop hunger.

Get in touch

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