Frontrunner - 21st April 2023

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WHEAT

• Wheat price rally short lived

Wheat futures markets rose sharply earlier this week, with traders concerned over the flow of grain from the Black Sea. Prices increased by around 6%, with Russia casting doubt on its renewal of the Ukraine Black Sea export deal next month. Subject to the terms of the deal, vessels entering or exiting the Ukrainian Black Sea must be inspected. However, Russia has blocked inspections as vessels passed through Turkish waters for a second day, which has prompted Ukraine to say that the export deal is at danger of collapse. Russia warned that prospects of an extension to the deal will be low once its previous 60-day extension ends in the middle of May unless certain criteria are met in respect to Western sanctions. Russia's Minister of Foreign Affairs, Sergey Lavrov, will meet UN representatives next week.

Further concern arose when Slovakia, Poland, Hungary, Bulgaria and Romania all introduced a ban on grain imports from Ukraine due to the negative impact of cheap Ukrainian imports on local grain prices. The action was taken despite a warning by Brussels regarding the legality of the decision. Futures markets fell back mid-week when vessel inspections by Russian officials resumed. In addition, Poland agreed with Ukrainian officials to allow the transit of Ukrainian grain across its borders. The agreement was reached under the strict condition that any grain must be electronically tracked to ensure nothing remains in Poland. More of the countries banning imports from Ukraine agreed to allow transit through to other destinations. The European Commission said it would enforce the ban in five EU states (Bulgaria, Hungary, Poland, Slovakia and Romania) until the end of June, provided that those states withdraw their individual bans and offer farmers a €100 million compensation package to help offset their lower grain prices.

• Mixed messages for Russian 2023 wheat production prospects

Black Sea agricultural market analyst, SovEcon, added 400,000 tonnes to its previous 2022-23 Russian wheat export estimate, increasing it to a total of 44.5 million tonnes. Almost 37 million tonnes will have been exported by the end of this month. SovEcon also increased its 2023-24 Russian wheat production estimate by 1.5 million tonnes to 86.8 million tonnes and forecast that Russia will export 43 million of this total next season. French analysts, Agritel, expect Russia to harvest 83.2 million tonnes of wheat in 2023. However, the Russian Ministry of Agriculture presented a more pessimistic view and said the Russian crop would only be 78 million tonnes. The Ministry added that this would include supplies from captured Ukrainian territory, although there was no detail on what that might include. Russian winter wheat planting is around 700,000 hectares down on the year and there have been reports of extensive ice sheets covering exposed crops, resulting in winter kill.

This week the Ukraine's Ministry of Agrarian Policy and Food said its country's 2023 grain harvest could reach 50 million tonnes with favourable weather. Its previous estimate was down at 44.3 million tonnes versus 53 million tonnes in 2022 and a record 86 million tonnes in 2021.

• US winter wheat stable but poor quality

US weekly winter wheat crop ratings were unchanged at 27% in 'good/excellent' condition. Spring wheat and corn plantings were behind expectations. Planting progress of spring wheat is 3% complete, two points behind expectations and four points behind the average. Planting progress of corn is 8% complete, which is two points behind expectations but three points ahead of the average.

BARLEY

• Export demand returns for old crop feed barley

Feed barley prices firmed at the beginning of the week on the back of rallies in global markets. As referenced with other commodities, disruption in the Black Sea grain flows has created some uncertainty.

There has been a focus on feed barley exports, with demand coming back to the UK primarily from Spain at the start of the week. Spain has seen below average rainfall since the start of the year and as a result is looking at a 2023 crop production number that would be lower than in 2022, when production reached approximately 6.8 million tonnes. With demand returning, two or three cargoes traded from the UK and there is still underlying interest from Spain. The UK still has a proportion of its barley surplus to market so this export demand is absolutely required, especially as the domestic market is so quiet with several feed compounders covered well into the summer.

• Spring drilling sees good progress

With a more favourable week weather-wise, spring plantings in Scotland have seen good progress, whilst the last 10% of spring plantings have largely been completed across England. Those crops drilled in England during late February to early March have now seen their second applications of fertiliser and overall, the crops that have emerged are in good condition. Much like Scotland, Scandinavian spring plantings have also progressed well.

• Spike in futures markets stimulates limited malting barley trade

Despite the increase in futures and feed values at the start of the week, there was limited malting barley trade from the maltsters. Old crop demand remains limited, with the attention now turning to the new crop positions. 

OILSEED RAPE

• Rapeseed market volatility continues

Extreme instability in the rapeseed market has continued with daily movements regularly exceeding €10/t in the MATIF futures market.

The key factors contributing to recent market strength include the debate over the status of the Black Sea grain export corridor with Russia seemingly taking a firmer stance and demanding more concession from the West. In combination with this, there has been unrest amongst Ukraine's bordering countries which came to a peak as local farmers perceive increased imports from Ukraine as harmful to their own grain prices, resulting in proposed bans on imports. However, this notion quickly faltered as the EU declared it would be breaking European trade law.

Whilst these events gave rapeseed prices some short-lived strength, taking many English ex-farm prices back to £400/t, the market quickly turned back to focus on the reality of this year's European rapeseed supply and demand. This features a heavy supply number that is being continually increased, mainly via Australian imports to the continent.

The drivers in this market going forward will still revolve heavily around movements in the Black Sea region and weather conditions for developing crops in Europe, Canada and Australia. There's also wider demand for vegetable oils which is heavily linked to world economic recovery following a hard winter on finances.

 FERTILISER

• Urea/AN

There has been a slight increase this week in purchasing activity of ammonium nitrate for spot movement due to an improvement in weather conditions across some regions of the UK. Looking ahead, urea offers for deliveries in June onwards have firmed slightly in the interim where suppliers are covering short positions and the US has seen a pick-up in interest.

Offers for nitrogen sulphur grades and imported ammonium nitrate have started to creep into the UK market for forward delivery. However, as gas and ammonia levels start to decline and a forecast for warmer weather conditions continues, growers are stalling their buying decisions until the outlook is clearer. The gas price in the UK has teetered around £1/therm this week, dipping just below to 98p/therm at the time of writing. It is believed that this will continue to decrease as temperatures increase and the demand for energy falls.

• Liquid

Another week of mostly settled conditions has seen urea ammonium nitrate applications continue at pace across the UK. Where dry settled conditions remain, with no rain in the short-term forecast, growers applying urea ammonium nitrate in situations with low crop cover - such as recently drilled sugar beet, spring cereals or land due for maize - should look to include a urease inhibitor like Limus Clear within their applications. Limus Clear reduces the risk of nitrogen losses through ammonia emissions.

With winter drilled cereal crops motoring through growth stages, terms are now available for foliar products targeting protein uplift in milling wheats. Contact your Frontier representative to discuss the products available in both bulk and IBCs in your area.

• PKs

Despite the recent reset on PK prices, demand is still relatively low and current buying patterns are being treated with a hand to mouth approach. Although last-minute purchasing decisions are inevitable, our blending and haulage facilities have the means to deliver product onto farm in a timely fashion. The outlook further forward is a gradual decrease in PK prices. 

Get in touch

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