Frontrunner - 20th January 2023

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WHEAT

• Possible Russian grain export restrictions

Russia's military activity in Ukraine have had a significant influence on wheat prices over the past 11 months. Last May, wheat futures soared to record high levels as the Russian invasion of Ukraine halted Black Sea exports from one of the world's primary wheat exporters. The subsequent arrival of a record Russian wheat crop - now put above 104 million tonnes - has resulted in notable wheat exports, increasing their market share in world markets. This has contributed to wheat futures prices falling back to levels not seen before the conflict. This week, official analysts raised this season's Russian wheat export estimate to 45.5 million tonnes, up from 33 million tonnes last season. Cheap Russian wheat sales saw the country's export pace rise by one million tonnes per week in December.

In a television interview on Tuesday, President Putin said that Russia needed to maintain stable food reserves by restricting some exports if necessary, although no details were provided. Putin also said that no one could accurately predict Russia's agricultural output for 2023, citing unexpected warm weather in Europe and frosts in Central Asia, as well as the fact that Russia would need to retain stable reserves for domestic use. These comments presented more uncertainty for markets and in doing so triggered a spell of short covering and support for wheat prices. However, later in the week the Ministry of Agriculture of the Russian Federation said there were no plans to amend the country's grain export quota and prices subsequently eased lower again.

• Questions over world corn supplies

A shrinking world corn balance sheet should offer wheat prices some element of support. Following last week's United States Department of Agriculture (USDA) World Agricultural Supply and Demands Estimates (WASDE) report for January, corn production for Argentina - the world's third largest exporter after Brazil and the US – is down to 52 million tonnes. Local analysts put the crop seven million tonnes lower at 45 million tonnes as a result of prolonged dryness and heat. Circumstances for Ukraine appear worse than the USDA might suggest, with its crop estimate at 27 million tonnes. This week, the Ministry of Agrarian Policy and Food of Ukraine said that the delayed corn harvest (a result of bad weather) had impacted yields and quality. The total corn crop may be 22-23 million tonnes; this compares to the 42-million-tonne total from last year. In contrast to wheat futures, Chicago Board of Trade (CBOT) corn futures rallied to their highest since the beginning of November 2022 before the rain arrived in Argentina, which triggered some profit taking.

BARLEY

• Bearish outlook on feed old barley continues

There's a continuation of slow exports which has been a feature of the season. Feed barley has been at a too small a discount to wheat in order to compete with other raw materials for compounder use. This picture looks set to remain the same. If this continues, old crop prices will come under pressure as they are £20/t above new crop values.

• New crop trade slow but few sellers

Because of the uncertainty surrounding the cost of production and the potential yield outlook, farmers have been absent from selling at the current new crop levels.

The focus of attention will potentially be other market influencers. Such as the Brazilian corn crop being the next major feed grain to be sown once the current soybean harvest is complete. Additionally, sowing in Ukraine will be down significantly whilst the conflict continuous. Finally, while global economic activity has been slow, it has impacted overall demand for all products. The pace and strength of any economic recovery will be a major feature, however, in the coming months it will remain uncertain.

It is worth keeping these factors in mind as they will be the main features over the next month. There's plenty of time to market new crop but as the crop goes through its growth stages, growers should consider the triggers that could lead them to market.

OILSEED RAPE

• Rapeseed prices decline for third consecutive week

This week saw rapeseed prices close lower than where they were three weeks ago. The fundamentals of supply and demand in combination with proposed legislation changes in Germany have weighed on market.

Europe has plenty of rapeseed to fulfil the increased demand levels present this year, through both domestic and imported sources. This has resulted in rapeseed becoming cheaper versus competing vegetable oil sources, such as soybeans.

Adding to the negative price outlook on rapeseed was an announcement from the German Federal Minister, Steffi Lemke. She stated that she would be sending proposals to the cabinet for the country to withdraw from the use of crop-based biofuels in the aim of reducing greenhouse gases. Instead of rapeseed oil, increased amounts of used cooking oil (UCO) and other waste products would constitute the non-mineral oil part of the biofuel blend.

• Global factors under consideration

Further afield, Argentina is set for increased rainfall in the near-term which is desperately needed to break the record drought seen there. Wet weather will aid planting and development of the country's soybean crop. Clearly, volumes and geographical cover will vary wildly here so traders will be watching forecasts closely.

The global economic situation is a strong driver for vegetable oil prices at the moment. Increasing interest rates and slowed growth have already fed through to lower oil demand in the nearby months, with crushers reportedly having to carry oil stocks to preceding months. There will be a keen focus on the speed of economic recovery, as this will be key for vegetable oil demand and in turn prices for the remainder of the year. Next week sees the start of Chinese New Year celebrations, which will see the country mostly absent from markets for a week. This could cause some choppiness as a key market driver is removed. 

 FERTILISER

• Urea/AN

The weakness in the gas price continues to fuel serious questions towards European ammonium nitrate (AN) producers around short/medium-term viability of either restarting plants or leaving them shut. Given the associated costs of start-up versus the risk of owning higher priced stock compared to granular urea they currently remain generally out of the market, keeping AN prices at a large premium compared to urea.

The urea market has again edged downwards during the week due to demand destruction and currency moves. UK AN remains offered to the market for March delivery, but activity and demand is low. There could be more weakness but on the upside, late season demand could cause price spikes and supply issues in spring 2023. Our advice is to act now and talk to your Frontier contact about market options.

• Liquid/UAN

As usage of liquid fertiliser approaches, growers are encouraged to confirm UAN requirements for the coming spring while taking into account any cropping changes, such as additional winter cereal areas that were drilled in recent months or the loss of winter oilseed rape. Growers' additional requirements for nitrogen and nitrogen sulphur grades should be discussed with their Frontier contact who will be able to confirm the regional options available.

With new tank installations ongoing for growers who have converted to UAN this season, it is important to ensure site preparation is completed in a timely fashion to avoid delays. A range of nitrogen phosphate grades are available in bulk and IBCs for root growers looking for starter fertiliser options this spring.

• PK/NPKs

This week has seen a steady increase in enquiries on potash, phosphate, PKs and NPKs for spring application. Markets remain flat with very little price movements. Some potential limited weakness in phosphates has also been helped by improving pound to dollar rates but actual physical stocks in the UK are scarce due to low Q4 2022 demand. A small increase in demand will very quickly lead to shortages of actual raw materials and late supply to farm and crop.

Get in touch

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.