By Frontier Trading Desk on Thursday, 19 December 2024
Category: Market information

Frontrunner - 19th December 2024

Early this month, London and Paris wheat futures fell to fresh contract lows, extending a run of falling prices that began two months before.

Poor EU wheat demand - highlighted by poor weekly wheat export sales - had encouraged managed money funds to build near record short positions in the Paris wheat futures which weighed on the market's weakness.

However, since then there's been a changing dynamic for the world's leading wheat exporters, Russia and Ukraine, as well as 2025 production concerns. This has triggered a wave of short covering, helping Paris wheat futures gain €14/t at their best this week.

WHEAT

Early this month, London and Paris wheat futures fell to fresh contract lows, extending a run of falling prices that began two months before.

Poor EU wheat demand - highlighted by poor weekly wheat export sales - had encouraged managed money funds to build near record short positions in the Paris wheat futures which weighed on the market's weakness.

However, since then there's been a changing dynamic for the world's leading wheat exporters, Russia and Ukraine, as well as 2025 production concerns. This has triggered a wave of short covering, helping Paris wheat futures gain €14/t at their best this week.

EU wheat export prospects were boosted following a tender result from Saudi Arabia - the country secured 804,000 tonnes of wheat this week for execution in February to April 2025.

Romania and Bulgaria proved competitive, securing volume sales at values ranging $262.50/t to $269.89/t including freight, depending on the shipment month and port for discharge.

Meanwhile, the Russian wheat export pace is slowing down with about 3.5 million tonnes expected to be shipped this month – this compares to the 4.1 million tonnes shipped last month.

In the UK, there has been recent misinformation on some social media channels that merchants – including Frontier – are importing Russian grain. Frontier has never imported grain from Russia and there are no reports of exports from the country coming to the UK via other means.

Relatively small amounts of imports have come from countries such as Germany and Denmark to fulfil consumer demand as a result of the low volume 2024 UK harvest, which this year has been some four million tonnes short of average and with lower proteins due to the difficult season.

Frontier's grain business is structured to support UK farmers via a nationwide team of traders and infrastructure that supports the movement of grain around the country to meet demand, with imports only happening where supply or quality cannot be delivered domestically.

Wheat production prospects for next season are mixed, but some see the potential for Russian output to slip notably lower on the year.

The challenging autumn drilling campaign and questionable crop establishment has resulted in the worst crop condition for decades and led one analyst to cut its Russian wheat production estimate below 79 million tonnes.

It's likely we'll see the smallest Russian wheat crop since 2021 when 76 million tonnes was produced. This lower crop from the world's primary wheat exporter should remove the downward price pressure we saw earlier this season when the country tried to capture export market share.

Closer to home, it's a contrasting picture. The French ministry of Agriculture and Food said the country's 2025 crop wheat area will be 4.51 million hectares - up 8.7% on last year's harvested area of 4.15 million hectares. However, with late drilling due to another wet autumn and some crop establishment issues, a similar harvested area to last year could be repeated.

The Rosario Grains Exchange raised its Argentinian wheat crop estimate to 19.3 million tonnes, up from previous estimates of 18.8 million tonnes. Meanwhile, the Buenos Aries Grains Exchange said the harvest was up to 64% complete, leaving the country's crop estimate at 18.6 million tonnes. In the United States Department of Agriculture's (USDA) World Agricultural Supply and Demand Estimates (WASDE) report for December, figures were lower at 17.5 million tonnes.

The additional crop (when comparing to the USDA estimate) is likely to head straight to exports. This will help offset the USDA challenge with its exaggerated Russian wheat exports estimate of 47 million tonnes which is not achievable given shipments to date.

BARLEY

Generally, it's been a quiet week in the barley market. However, the UK did receive some export interest and values have been underpinned due to a vessel colliding with the gates of Müden Lock in Germany on the river Moselle (a tributary of the Rhine).

Looking forward to crop '25 and with both winter and spring barley areas reduced from crop '24, feed barley is trading at a relatively narrow discount to feed wheat (around £12/t - £13/t).

Malting barley values have firmed slightly, however, demand for old crop malting barley for movement between January and March remains muted.

Looking forward to next year, the market is quiet as maltsters wait for their brewing and distilling customers to come forward before looking to purchase malting barley. There are also concerns over demand persisting and growers being too relaxed to market fixed price malting barley.

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 available. Find out more about our risk management solutions. 

​OILSEED RAPE

Rapeseed markets have been turbulent in the last week because of the aforementioned damage to the gates of Müden Lock in Germany causing a frenzy. Traders believe they may not be able to take tender of the February MATIF contracts. This caused a sharp rise in the February contract but the May contract did not follow. A strong pound also detracted from the benefit to the UK farmer, as rate cuts look less and less likely.

In end markets, vegetable oil prices are currently stagnant as fresh demand is absent. Political policy around biofuels, in combination with European import progress from the likes of Canada and Australia, will be key drivers going into the new year. 

 PULSES

Domestic feed bean demand remains quiet, as beans remain at a higher value than other protein sources. There needs to be a downwards pressure on value before we see any major changes to demand.

There has been a steady supply for the first quarter of 2025, meaning the current shorts are filling in quickly.

Export continues to be quiet, not only with demand being slow, but the UK market continues to value beans €5-€10 higher than where consumers need beans to be. The question remains: where will the UK feed bean supply be priced in to?

Supply of human consumption beans in the UK appears to be slowing, even though there continues to be an opportunity for good quality beans in January and February. Please continue to send samples to your local farm representative to make the most of this export market. 

 FERTILISER

Once again, we have seen a worldwide increase in urea prices. This is mainly due to the announcement of the latest Indian tender and the amount being sought was more than initially expected. Also having an impact is the increased global purchasing of granular urea and gas issues in Iran affecting production of urea.

Whilst the Iran gas issues don't directly affect the UK market, it does take production out of the world market and impacts countries that rely on Iranian product. China is also continuing its export ban which has a knock-on effect to urea prices internationally. We're also likely to see North and South America come into the market to buy some urea very soon.

Egyptian urea values have increased by approximately $40 since the beginning of December and are nearly at the highs last seen in October this year. This is now starting to have an impact on the prices here in the UK – values firmed in the last week. The sentiment is that urea values will hold up in price heading into the first quarter of 2025.

In the nitrates market, factories continue to feel the pinch with the continued reduction in production due to the high gas and ammonia values.

Gas and ammonia values have decreased slightly in the last week, mainly due to the current warm temperatures. Whilst this could be a temporary easing, they are still higher than what makes producing ammonium nitrate viable or profitable for producers. It is still not cost-effective to produce ammonium nitrate for many manufacturers, even at these slightly lower levels of gas and ammonia.

This gives an indication that ammonium nitrate will be in tight supply heading into spring and prices are likely to rise as demand picks up. The firming in the nitrogen price will also influence NPK pricing going forward.

In such a tight market, it's sensible to cover at least your first dressing, if not most of your requirements for the spring.

Growers with on farm tank capacity continue to have the opportunity to take product ahead of the spring usage period, albeit in the new year, as UK UAN facilities close for the festive period in the coming days.

At present, UAN values remain unchanged. However, in quarter one there's an anticipated rise in values on the back of increasing raw material costs and increased replacement values. Therefore, you should review your total UAN requirements ahead of the spring season, factoring in any changes in cropping.

Root growers placing NP or NPK products this coming spring have access to a full portfolio of quality, water soluble grades.

Potash has seen a slight increase in values from the 'floor' prices seen a couple of weeks ago. This is also due to an increase in global buying, including an uptick in demand in the UK and the possibility of tariffs from the US being implemented.

Phosphates remain firm due to lack of available product and limited suppliers offering phosphate products.

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.

To be notified each time this report is published in the future, you can also subscribe at www.frontierag.co.uk/blog/subscribe to ensure you always have the latest market insights.

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