Frontrunner - 20th October 2023

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WHEAT

• World markets edge higher

World wheat futures markets have been choppy this week, but have edged forward and recovered from the lows seen at the end of last month.

Speculative funds holding significant short positions have taken some cover because of the uncertainty around increasing tensions in the Middle East, as well as the rise in other commodity prices such as crude oil.

Recent sales of US and French wheat to China have improved prospects for wheat exports and supported the markets. It's thought the French sale could be between two and 2.5 million tonnes and France has supposedly made a wheat sale to Morocco too. However, the market needs to see some evidence of these sales and there are yet to be reports of any vessels loading wheat in French ports.

The EU export progress is behind last year, with a similar sized surplus to move of around 30 million tonnes. Having said that, the weekly update from Brussels showed a sizeable 689,000 tonnes shipped last week, taking the cumulative to 8.814 million tonnes. However, this is still less than the 11.338-million-tonne figure from last year, though there are suggestions that this difference could be smaller as some unaccounted shipments haven't yet been included in official numbers.

On the other side of the coin, EU wheat imports are 800,000 up on last year at a total of 2.42 million tonnes, which contributes to an oversupply in the pre-Christmas position.

• Volatile London wheat futures

In contrast to world markets, UK wheat futures have seen a volatile trading week as the nearby November 2023 position nears the tendering period.

Prices rallied to a three-week high in technical trade, even though world markets have been quiet with limited change. Over the past couple of months, the November contract has become increasingly discounted to forward positions because of a lack of physical demand for feed wheat from domestic consumers in the animal feed sector.

Although UK wheat is towards the low end of its price cycle, it remains too expensive to compete in export markets. Countries such as Poland have significant surpluses of feed wheat and have undercut UK supplies to traditional UK export homes such as Ireland. By the end of October, the UK will have shipped little more than 100,000 tonnes of feed wheat from a surplus that is around one million tonnes.

The Agriculture and Horticulture Development Board (AHDB) provisional UK production estimate is at 14.1 million tonnes and is well below estimations made earlier in the year. Despite this, the UK needs to find export demand to avoid a burdensome carry out into next season.

Drilling of the 2024 crop has progressed well so far, but adverse weather forecast for the coming days will no doubt stall any opportunities to make further headway. While many farmers have managed to get their winter wheat in the ground, overall planting of the crop is far from complete.

• Mixed views on Russian output

Russia's agriculture consultancy, IKAR, raised its Russian 2023-24 grain output estimate from 141.2 to 141.6 million tonnes. This is the result of an improving picture for the country's corn crop which is up by the same amount on previous estimates to 16.4 million tonnes.

Analysts see Russian October wheat exports falling to meet 4.1 million tonnes which is around one million tonnes lower than what was shipped in September. It's unclear whether this is a result of lower demand, increased competition, or congested logistics.

There has been little fresh business reported this week, with Russian prices in a wide range of £225/$250 FOB.

Russian analyst, SovEcon, cut its 2023 Russian wheat production estimate from 91.6 to 91.4 million tonnes, but this is still its second highest ever crop. President Putin said the country's grain crop is between 137-138 million tonnes above official ministry figures of 135 million tonnes, but is well below last year's output of 158 million tonnes.

BARLEY

• Quality issues balanced by lacklustre demand

Spring barley prices for crop '23 remain mostly unchanged relative to last week, though premiums over feed barley may have narrowed slightly from the £70-80/t range due to this week's increase in the feed base.

However, there are persistent quality issues due to a harvest disrupted by inclement weather and this will support malting premiums for now.

Pre-Christmas domestic demand is low, although it looks set to pick up into the new year albeit tentatively. What little demand we have seen from maltsters and brewers in 2024 is being spread across the remainder of the season.

• UK feed barley still struggling to find buyers

Crop '23 winter barley values are up roughly 2% on the week, slightly less than what wheat futures have rallied in the same period.

This is down to the UK still not being export competitive and the fact that domestic demand for feed grains is lacking. The majority of near-term demand we have seen has come from trade shorts.

On the other hand, the barley discount to wheat currently sits at around £20/t – region dependent. This is wide enough for barley to remain a material part of feed rations which has been evident in compounder demand in the new year.

Farm supply has picked up slightly this week. This may be because winter barley drilling for crop '24 is nearing completion in England. This would be as good a time as any to explore the wide range of grain marketing options we offer for crop '24. Don't hesitate to speak to your farm trader about the strategies that may work best for you. 

OILSEED RAPE

• Rapeseed prices plateau

This week, rapeseed prices have been generally flat after a positive end to the preceding week following an updated United States Department of Agriculture (USDA) report. You can read last week's Frontrunner for more detail.

Nearby positions are becoming very discounted to the deferred ones, as the European crusher has ample cover up until the new year. This is seen predominantly in the MATIF futures where, at the time of writing, the carry from November to February has stretched to a colossal €34/t. This shows just how abundant rapeseed is, particularly in the spot month.

Elsewhere in oilseeds, soybeans have been on a strong upwards run following the bullish aforementioned USDA report, which highlighted the compounding effect of continued dryness in Brazil and how it's starting to cause some challenges for plantings.

The canola harvest in Australia is now commencing and crop estimates are seemingly increasing towards the six-million-tonne level which will not help a price rally. This seed will start getting offered in high volumes in the next couple of months, which could put further pressure on rapeseed throughout Europe.

Domestically there are widespread concerns over the condition of the recently planted crop, as pest pressure has resulted in many crop failures. It will be a challenge for the UK to produce over a one million tonne crop next year, which increases our reliance on imports. 

 PULSES

This week we have seen bean values hold firm with the continued trend of shorts supporting prices. With no pickup in export and domestic demand for UK feed beans and the relative cheap prices for competing protein sources, near term bean values are overvalued. Therefore, there is still a good opportunity for growers to sell at elevated prices.

Latest figures from Defra show a 1.2% increase in the bean harvested area and a 6.5% increase for peas harvested this year. Given the current situation with the oilseed rape crop, we expect this trend to continue in 2024.

We are keen to support a growing pulse market and are currently in the process of releasing our 2024 buyback contracts and our pea contract is being released early next week. Please contact your farm trader for more information.

 FERTILISER

• AN/Urea

Markets remain static globally as producers take stock of current geo-political situations and the effects they have on short-term gas and ammonia prices. Prices for UK ammonium nitrate (AN) which had been on offer for the next available delivery period of February/March have been withdrawn as daily volatility with raw materials causes concern on production costs and therefore AN levels.

In Europe, producers haven't been offering growers the ability to buy AN forward like we have benefited from in the UK. Therefore, concerns are growing with regards to physical supply. Today, we see spot gas prices 80% higher than they were on the first day of the new season nitrogen offer in May 2023. It's forecast higher again for December and for the first quarter of 2024. Some European producers that do have gas contracts lower than the current spot/November levels will restart, but only to produce ammonia and UAN for export.

These higher costs will delay any decisions to recommence fresh bagged AN production and the longer the delay in resuming, the less volume will be available. Many European countries are already stating untraditionally low AN stock and without a reduction in gas/ammonia prices it's looking likely supplies of AN will continue to be tight.

Urea markets again didn't see much activity this week, as the world awaits the result of the Indian tender that is due on 20^th October. This weekend should provide information on the direction of the markets. This will not only show what volumes regions can provide (as it looks like another 1.2 million tonnes is required), but more importantly will shed light on whether the price will be accepted by India.

• Liquid

As large vessels discharge in the Southeast of the UK, the pace of deliveries to on-farm storage will increase through October to fulfil existing orders.

Based on pressures in the energy markets referenced last week, one UAN supplier has moved to a POA position to manage pricing and volumes offered into the marketplace. However, their values, along with others which are unchanged, remain competitive against solid offerings for delivery through next spring.

As drilling progressed before Storm Babet reached the UK, growers with firm requirements for the coming spring have taken advantage of the competitive values on offer and made additional purchases in recent days.

• PKs/Straights

Activity might be slow in the UK, but globally markets are moving up.

Phosphates are already seeing major supply issues, not just with TSP out of Israel but also with DAP as the Lithuanian plant is permanently closed. Both provide challenges to source from other regions given the lack of any Russian product. Phosphates are likely to be tight into the UK into Q1 and prices are expected to be higher.

Potash is also tighter in supply as producing country, Israel, is off the list which leaves fewer options and it's expected that prices move up very soon. PK and NPK markets will also feel the effect of rising raw materials.

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.