Frontrunner - 19th May 2023

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WHEAT

• Mixed supply picture for 2023-24

Late last Friday, the United States Department of Agriculture (USDA) published its first look at the world's 2023-24 grain balance sheets, with a contrasting outlook for wheat and corn. World wheat production is seen rising by 1.5 million tonnes up to 789.76 million tonnes, but year-end stocks will fall by two million tonnes down to 264.34 million tonnes – this will be the lowest for seven years.

Higher production for the world's largest wheat producing countries China and India, as well as the EU, contribute mostly to the world increase but it is important to note falling production on the year for many of the world's major wheat exporters. Argentina, Australia, Canada, Russia and Ukraine will produce ten million tonnes less between them. Despite an 11% increase in the US wheat area, the US wheat crop will be just 260,000 tones up on the year at 45.16 million tonnes. This is because of significant winter wheat crop losses, particularly in Kansas, which is where most of the hard red winter wheat is grown. This has been reflected in the equal worst crop ratings since 1996. US farmers have planted 49.9 million acres of winter wheat, 4.2 million acres up on last year but the USDA see them harvesting just 37.1 million acres - just 1.6 million acres up on last year.

For corn, the situation is almost opposite. The US crop is expected to rise by 39 million tonnes from the combination of a larger area (3.4 million acres up at 92 million acres) and higher yield (182 bushels per acre), which would be a record. Argentina and the EU are both higher up - 17 and 11 million tonnes respectively. Overall, world production is seen increasing by almost 70 million tonnes and with higher consumption - up 34 million tonnes - stocks will increase by 15 million tonnes.

Weather is now key, particularly for corn with so much of the predicted USDA production still to be planted. For wheat, with global exporters producing less there is little room for crop issues.

• Black Sea deal extended

Midweek, the four parties involved in the Ukraine Black Sea export corridor confirmed their agreement to a two-month extension of the deal from 18^th May. Despite previous threats to the country, Russia said it had reached what it called a 'qualified result' for Russia in negotiations over easing restrictions on Russian agricultural exports. A Ukraine official welcomed a resumption of the initiative which will continue to be valid until the 18^th of July. UN Secretary General, Antonio Guterres, said the continuation was good news for the world but noted outstanding issues remained that Russia, Ukraine, Turkey and the UN will continue to discuss.

Wheat futures markets fell sharply on the news, losing around 3% in value. Ukraine wheat has swollen EU supplies, particularly in nearby countries Poland, Romania, Bulgaria and Slovakia, and will contribute to EU wheat stocks - increasing by around four million tonnes by the end of this season. This heavy balance sheet, coupled with ongoing competition in export markets from the Black Sea, leaves short term price prospects challenging.

BARLEY

• Pressure on old and new feed barley crop

Old and new crop feed barley values have come under pressure this week, following the wider grains complex lower. This is due to Wednesday's news that the Black Sea grain export corridor deal would be extended for two months. Old crop feed barley remains a premium to harvest prices and volumes continue to come forward from farms looking to clear out sheds prior to harvest.

• Malting barley

It has been a very quiet week in the malting barley market. Old crop malting barley values are now non-existent with both domestic first-hand and short buyers fully covered for the season. Any additional export trade feels unlikely, as UK malting barley remains a significant premium to Scandinavian malting barley. New crop malting barley remains illiquid, with farmers generally reluctant to sell forward despite healthy malting premiums. Buyers' prices are lower with the feed barley base prices also falling.

• Looking forward to crop 23

Frontier is offering a range of marketing options to help growers manage risk when marketing malting barley crops. Guaranteed minimum premium contracts, futures related distilling contracts and malting barley pools are just a selection of the options available. Please speak to your local farm trader for more information.

OILSEED RAPE

• OSR prices fall to two-year lows

This week, the decline in rapeseed prices continued as values fell to the lowest levels in two years. This is due to the lack of confidence for vegetable oil demand and burdensome rapeseed supplies present globally. In euro terms, August MATIF futures traded under €400/t in the middle of the week, which is an important psychological level for traders around which the market may trade in the coming weeks. In the back of traders' minds is a large supply potential again for the 23/24 crop year, with some expecting a European crop of 21 million tonnes along with a large carryover from this year. All of this will surely have a softening effect on the market.

Elsewhere in the oilseeds complex, demand for exportable US soybeans is weak. This is mainly due to a lack of demand in China where economic growth has not met expectation since they reduced Covid-19 related lockdown measures at the start of 2023. The lack of bullish news in the bean market also suggests the trade is still assuming that gains in Brazilian production will be enough to offset the heavy losses seen in Argentina. Globally, markets are struggling to sustain gains through lack of confidence in vegetable oil markets which will keep wider oilseeds markets under pressure for now.

 PULSES

Old crop bean markets have essentially dried up due to lack of available supplies, but with minimal demand spot values remain largely unchanged.

The warmer humid weather has been very beneficial for both winter and spring bean crops, with many growing away from disease issues such as chocolate spot. Winter beans are now starting to flower and as long as the crops aren't too thick, we expect to see good pod fill followed by good yields. New crop bean values relative to wheat are holding up well, with a few growers locking into values at £30/t over ex farm levels with the potential to add a human consumption premium after harvest quality is known. 

 FERTILISER

• AN/Urea

As UK farmers are completing their base nitrogen and sulphur programmes on combinable crops, there has been an increase in spot requirements for nitrogen and nitrogen sulphur fertilisers. In addition to this, the grassland market appears to be holding off ahead of the likely UK nitrogen market reset. There are question marks over the UK ammonium nitrate (AN) offer release date but with gas price reductions and subsequent potential decreases in cost of production, it feels imminent over the coming weeks.

The premium on AN and urea has narrowed and with some urea importers' offers increasing for spot delivery, later delivery offers for these products are unchanged. Latest import stats for Q1 on urea are very similar to 2022 levels due to Russia-Ukraine tensions. It is assumed that some of the volume has entered the market and some will spill over into crop 2024 inputs.

• UAN/liquid

As above, all liquid suppliers have seen an increase in spot deliveries as growers complete nitrogen programmes but need their final requirements.

Within the liquid and foliar sector, there have been offers into the milling wheat nutrition market where contracts allow. The recent levels aren't likely to change given the relatively flat urea market.

Finally, in the urea polymer market, following renewed farmer buying interest to support oilseed rape crops post-petal fall and as T2 applications for wheat commence, it would appear manufacturers stocked themselves early in the season and values remain unchanged.

• PKs

No changes to report within the PK market, but some attention should be paid to the potassium market and its impact on the ICL polysulphate range of fertilisers. Although considered as sulphur products, they do follow the potassium market trends.

Get in touch

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