Frontrunner - 19th September 2024

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WHEAT

• USDA calm markets

The end of last week saw the United States Department of Agriculture (USDA) publish its September World Agricultural Supply and Demand Estimates (WASDE) report. Any expectations for a bullish report to boost prices were dashed.

World production was cut 1.5 million tonnes to 796.88 million tonnes and there was also a 900,000-tonne rise in consumption which presented a potential marked cut in year-end stocks. However, increases for carry-in Canadian stock to this season to align with StatsCan leaves year-end stocks up 600,000 tonnes on last month to a total of 257.22 million tonnes. Despite this being eight million tonnes down on last year, the market subsequently found ready sellers.

There was little to help the markets from the world corn balance sheet. Several analysts expected a cut for the US corn yield estimate, but it was increased by one million tonnes.

Ukrainian corn production was left unchanged at 27.2 million tonnes, meanwhile other estimates range from 22 to 25 million tonnes because of recent record heat and dryness.

EU corn production was cut to 59 million tonnes when other estimates are down to 57 million tonnes.

Overall, world production is seen 1.2 million tonnes lower than last month and end stocks are also seen 1.8 million tonnes lower at 308.35 million tonnes. Persistent heat and dryness in eastern Ukraine and Russia, coupled with extensive flooding in central Europe, could see further cuts in production.

• Black Sea war risk outweighed by cheap sales

The escalation of the conflict between Ukraine and Russia and its potential wider consequences meant speculative funds took more cover which edged futures prices up as a result.

A Russian drone attack on a Ukrainian cargo vessel carrying wheat to Egypt highlighted the potential disruption of supplies from the Black Sea, the worlds cheapest origin. However, news of a private Russian wheat sale to Egypt for 430,000 tonnes at a season-low price of $233 including freight for October saw sellers more active and prices weaker again.

In general, Russian and Ukrainian export prices remain anchored at their lows and a continued fast export pace for both countries - regardless of any conflict issues – are continuing to add to market negativity.

Ukrainian wheat exports reached 4.68 million tonnes up from 2.5 million tonnes this time last season and Russia continues to ship about one million tonnes of wheat each week.

• EU wheat sales lag but not a significant issue yet

Despite EU wheat prices at a premium to those offered from the Black Sea, previous cheap Bulgarian and Romanian supplies helped EU weekly wheat exports to rise by 483,000 tonnes to a total of 5.389 million tonnes.

As usual with EU numbers, the data is incomplete but the lag on last year is growing with 6.994 million tonnes shipped at that time. Nonetheless, if a similar volume is shipped each week to the end of the season, the 25 million tonnes estimated exportable surplus will be near complete which leaves the EU with a tight year-end stock.

Romania accounts for the lion's share of the EU wheat shipped - 1.95 million tonnes with France at only 500,000 tonnes. Nigeria is the primary taker at 855,000 tonnes. The UK is still number five on the list, taking 348,000 tonnes.

BARLEY

• Barley's discount to wheat has narrowed

Consumer demand has increased this week, particularly in the northern regions of England.

Even as discounts to wheat are reduced, Yorkshire compounders have sought cover for October to December. January to March interest is increasing in the West Midlands and the Northwest. Just how much barley will feature in the lowest cost formulas of 2025 remains a watch point as the £30/t discount a few months ago has shrunk to nearer £20/t so wheat may begin to displace barley in feed rations.

• Weak malting premiums are boosting feed supply

Malting barley premiums are under pressure and continue to sit at the bottom end of the range. Scotland's harvest is continuing at a good pace and has very few quality and yield issues.

It's expected that 75% of the spring barely will be in the shed by the end of the week, but early selling has been directing it towards feed sales rather than malting markets.

OILSEED RAPE

• Rapeseed markets still lack direction

The trade battles with low vegetable oil prices versus difficulties of sourcing rapeseed from farm at relatively low prices.

Estimates for the final EU-27 rapeseed production number continue to decrease to around 17 million tonnes. This week also saw an updated estimate for the Canadian canola crop which came in at a shade under 19 million tonnes. This was lower than most trade estimates and the crop is now well into harvest. In Australia, another key rapeseed growing area, there remains positivity around crop prospects which will be harvested later in the year.

In other European news, it's looking increasingly likely that the European Union's Deforestation Regulation (EUDR) which was set to come into force in January 2025 is now going to be postponed. This is due to mounting pressure coming from EU member states and countries exporting to the EU because of the anti-competitive and limiting nature of the legislation.

Recently, the soybean market has been on a steady uptrend after reaching multi-year lows in August. This is mostly on the basis that Brazil is experiencing dry conditions during its planting window. There is plenty of time left for this crop to get planted and production estimates remain high which further adds to the supply weight created by the large US crop that is currently being harvested. 

 PULSES

• UK bean trade remains sluggish

There is still at least 50% of the total spring bean crop yet to be harvested and with little volume coming to the market, trade buyers have needed to pay up £1-2/t to cover feed short positions.

The key point of interest to us is the quality problems coming from the Baltic. Currently there are three vessels containing 25-30,000 tonnes looking to load full specification food quality beans, but due to the high levels of insect damage in this region this year it's becoming increasingly difficult to do this.

The vessels will be loaded with a combination of food and feed quality, but the buyers still need higher quality and are turning to the UK. More containers of food beans have traded from the UK this week and now buyers are looking to buy bulk vessels to make up the Baltic shortfall.

This window of opportunity will be short lived as there is another big crop of insect-free beans coming from Australia in the next two to three months. It's important to get spring beans tested for quality as soon as possible to find the best market. 

 FERTILISER

• AN/urea

European gas values have eased slightly from previous reports due to forecasted warmer weather and a reduction in supply disruptions.

Higher temperatures are expected in northwest Europe and Norwegian supply issues look likely to improve. Norwegian gas flows to the UK have increased as the Langeled pipeline is fully operational after maintenance. European storage sites are 93% full, providing a buffer against potential winter disruptions.

Despite this short-term decrease, there are reports that three Egyptian urea producers have had their gas feedstock supply cut and are running at 70-80% capacity but for how long is unknown.

Since the completion of the last Indian tender, we have seen UK values firm and increased by over $20/t - another tender is on the cards and could be as soon as October.

Similarly in the UK, at time of writing natural gas prices have eased marginally but the UK AN producer relies solely on ammonia for its production and that remains firm. Since early June, prices have increased by around $180 so it's still pertinent for those who are in a position to do so, to make decisions on their AN requirements or a percentage of it whilst current terms are available through to the end of the calendar year.

The strong ammonia levels are also impacting European AN production, causing the region to slow down and reduce output until demand returns.

• Liquid/UAN

Although the UK UAN market remains relatively quiet from a trading perspective, good levels of stock across the UK portside is allowing continued deliveries to new and existing on-farm storage.

Those with tank fill capacity still have access to a full portfolio of products for the autumn-winter delivery period at terms that are very competitive against current solid AN systems.

As we approach winter cereal drilling in the coming weeks and growers look to make a more imminent start on their drilling campaigns in some regions, total requirements for nitrogen and nitrogen sulphur products become clearer.

When requirements are known, growers will also have the opportunity to secure product for spring 2025 delivery at terms that currently remain unchanged but volumes are limited.

• PKs/straights

There is very little fresh news to report on the P and K market this week.

Phosphates remain firm due to global demand outstripping an increasing supply of product. There are also changes in trade flows, for example, India, which traditionally buys DAP, has also emerged as a TSP destination which further adds to supply delays.

Recently, whilst potash has firmed slightly, it remains relatively flat with no supply issues. If you still need to cover your sulphur requirements and are thinking of - or have made the decision to - decouple from nitrogen, polysulphate is available for delivery this side of Christmas and can be in stores ready for application early in 2025.

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