Frontrunner - 1st November 2019

WHEAT

• Two-pronged support for wheat prices early this week

Brexit uncertainty and winter drilling delays in the UK continue to add volatility to wheat markets. Last weekend's Brexit extension significantly widened the window for tariff-free exports to the EU, which was seen by some as a bullish flag. In addition to this, the persistent deluge of rainfall continues to delay the drilling campaign with progress varying from one location and land-type to the next, so farmer selling of 2019 and 2020 crop has naturally slowed. As a result, London futures traded to £148.55 midweek which, along with new crop futures, was their highest level since mid-August. The increase was seen despite plentiful stocks and weaker markets globally.

• Is the UK losing its competitive edge?

Although in principle, Brexit provides a wider window which could be a supportive feature of the market, it still requires the UK to remain competitive to other origins for the flow of exports to continue. Having harvested the largest crop since 2015, most figures put the UK exportable wheat surplus over two million tonnes. Sales-to-date sit at less than 50% of that, so there is still a long way to go before the figures balance out. US wheat is getting cheaper as they attempt to compete globally and huge increases in EU wheat harvests are also adding price pressures close to home. In essence, it feels that some of the factors that have supported domestic prices this week are now known and priced into the market. Therefore, it's possible that any further upside could be limited. 

BARLEY

• Barley benefits from further window for EU exports

With clarity over the chance to export up until the end of January 2020, buyers returned to the English malting barley market this week at premiums of around £8-£10/t over feed barley prices. UK malting barley prices need to remain at this competitive value to unlock additional demand.

The story is similar with feed barley, where merchants are looking for supplies to fill vessels for EU and other destinations. The UK will have potentially shipped one million tonnes of barley by the end of November – out of the 2.2 million surplus as shown by the Agriculture and Horticulture Development Board (AHDB) – and values remain steady for the time being. Key will be the demand profile after Christmas and this will depend on the crop sizes in the Southern Hemisphere which normally has sizeable export quantities. However, it has been suffering dry conditions for some time and harvest is due to start there within the next four weeks which will give a clearer picture going forward.

​OILSEED RAPE

• Future of sterling uncertain

In a matter of days we have gone from thinking that we had a Brexit deal sorted to facing a general election with a very uncertain outcome politically. This uncertainty extends further with regards to future relationships with our key trading partners. For the next two months we must expect considerable volatility in the value of sterling and this could well be the most significant factor in shaping domestic oilseeds values going forward.

• Australian selling to Europe picking up

The Australian harvest is getting underway in western and southern regions. Drought conditions have made farmers reluctant forward sellers, with the result that the Australian farmer has virtually no forward sales on the books. It is expected that selling pressure will build over the coming weeks, with much of it likely to be felt in our European markets. Europe is the primary target market for Australia's exports and we expect to see an increase in sales of 60,000 tonne cargoes or being hedged on the MATIF oilseed futures market adding pressure to prices.

• Cheap canola on offer from Canada

Traders are also keeping a close eye on developments in the Canadian canola market. Following difficulties with snow cover, they are now into the final 20% of their harvest and shippers continue to target Europe for orders given their difficulties with their traditional Chinese buyers. Not only have they had political obstacles – there is also a switch from canola demand in China in favour of the latest tranche of tariff-free US soybeans. Canadian canola is offered at a £35/t discount, and this, along with the Australian trade flows, is likely to keep a lid on any attempted market rallies.

 PULSES

• Values falling for old crop beans

The old crop bean market remains very quiet, with little new buying activity for feed beans. On-farm values remain unchanged, with limited volume changing hands. As market values crab sideways, it is only a matter of time before we see values falling as the supply of feed beans weighs more heavily on the market.

• High-grade specifications leads to low volumes of trading

Demand remains for bagged quality spring beans to Sudan for spot shipment. However, with very few samples able to make this high-grade specification, little volume is trading. It will be well into the new year before we see renewed buying interest from Egypt. 

 FERTILISER

• Nitrogen and PKs

Another week of political turmoil saw very little change in the fertiliser markets. The weather still wins over any price movements, and so we all sit and wait for what comes next. CF Fertilisers and Yara remain quiet watching currency and world markets, which provide little help given the current UK drilling dilemma.

Alongside its divisions, SOYL and Kings, Frontier is hosting a series of 17 winter training events. Open to all farmers interested in learning more about the use of digital technology to improve crop production performance, the events will include valuable insight into MyFarm and its role as a complete farm management platform.

You can find your local event and book your place by visiting our website.