Frontrunner - 21st November 2024

WHEAT

• Wheat markets rally

Escalating tensions between Russia and the West have left speculative traders nervous given their near record short position in French wheat futures. The uncertainty over potential interruption to Black Sea grain flows triggered a wave of short covering to reduce risk which helped rally wheat prices by almost £8/t from last week's multi-month lows.

Adding to the upside price potential is the likely cuts to the Russian grain export quota for the February to June 2025 period. Some see the number falling to just ten million tonnes, although the official announcement won't be made until January. Stricter Russian wheat export controls might be expected given the fast pace of shipping this season to date, coupled with the lowest winter wheat planted area this autumn since 2018-19 and what's in the ground being less than perfect.

In contrast, the Ukrainian Ministry of Agrarian Policy and Food said the country's 2025 wheat output should reach 25 million tonnes, an increase from 22.4 million tonnes this year - the winter planted area is up to five million hectares from 4.6 million hectares last year. Apparently, Ukraine has lost 18% of its agricultural land because of the conflict with Russia. Ukraine wheat exports are now up to 8.35 million tonnes from a government quota for the season of 16.2 million tonnes.

• Improving US wheat outlook

Extensive beneficial rain has fallen across the US winter wheat belt, significantly reducing the area in drought and presenting an upbeat outlook for 2025 production. This encouraged managed money traders to expand their short books in the US wheat futures markets by over 90,000 contracts over the past two months.

The weekly US crop progress report put corn harvesting six points up on the week at 77% complete, which is five points ahead of average. Winter wheat planting reached 94% complete - a point behind trade guesses and two points behind average. The winter wheat crop condition jumped five points on the week to 49% rated 'good/excellent'. Texas jumped 17 points to 49% rated 'good/excellent'.

• EU wheat sales slow

The EU wheat export pace remains challenged with just 8.79 million tonnes shipped so far when compared to the 12.66 million tonnes last year. This highlights how poor the EU wheat export trade has been.

To fulfil the UK requirements due to the poor harvest, the UK has become a leading destination of European grain, with 700,000 tonnes committed so far. The UK is ahead of traditionally notable north African buyers Algeria, Egypt and Morocco. However, Morocco has been an active buyer recently and is thought to have purchased up to one million tonnes of wheat since late October.

This will help the French trade with up to 250,000 tonnes of the share, whilst Russia is thought to account for half of it. In a normal season, France is the EU's primary wheat exporter, but official shipments to date are only 917,000 tonnes. French wheat export estimates this season have been marked back to only 3.9 million tonnes, but with only 25% of that shipped, exports need to become more competitive or the rivalry from Russia and Ukraine needs to ease. 

BARLEY

• Feed barley prices find some short-term support

Feed barley values have found some support in the last week on the back of firming wheat markets given fresh uncertainty regarding the situation between Russia and Ukraine.

In the last two weeks, the UK has connected on some export trade to Ireland which has also supported prices. These exports will be loaded from the Southeast of England, giving support to ex farm prices that were the cheapest in the country.

Exports this season have been much slower than usual in the face of an increased surplus of feed barley, particularly in the southeast regions. In the north, it's more balanced and this area has been able to pull some of the surplus from the south.

• Domestic demand still slow despite wide discount

Domestically, compounders are well covered now until the end of March, with buying attention now switching to summer months. Fresh compound demand has been limited in the last month given the warmer than average and dry start to autumn, although this week's cold snap is likely to bring any remaining livestock inside. Barley is still trading at around £25-£30/t under wheat and is therefore good value versus other commodities.

• Malting barley premiums under pressure

With a firming feed barley market, malting barley premiums have narrowed slightly on the week. Fresh demand for malting barley has been limited due to the cereal price rally being feed grain orientated.

With malting barley premiums narrowing, we could expect to see more malting barley sold as feed barley as the risk versus reward just not high enough to sell as malting barley in many parts of the UK. 

OILSEED RAPE

• Rapeseed values reach high levels

This week, rapeseed values continued to climb to marketing year highs. Meanwhile, vegetable oil markets held their ground and supplies of imported rapeseed remain expensive and challenging to secure in the nearby positions. However, Canadian canola is now trading at large enough discounts to look attractive for import to Europe. Funds and managed money traders are also holding a record long position in MATIF rapeseed which has been helping keep values supported.

In the last week, the European Parliament approved the European Commission's proposal to postpone the EU Deforestation Regulation (EUDR) to 30th December 2025 – it was originally due to start on 1^st January 2025. However, the regulation also adopted some amendments which must be approved by the EU Council and Commission. Therefore, there still isn't any legal certainty for the postponement of the regulation.

Elsewhere, soybean values continue to slide as demand remains constant whilst a large US crop is harvested and plantings are well ahead of average pace in Brazil. 

 PULSES

• Beans

The feed bean market remains static in terms of values, despite needing to fall to become competitive with other protein sources.

There has been little traded in the export market, with buyers full in the nearby with the poor-quality Baltic crop.

Human consumption beans continue to trade at a £20/t premium to feed beans pre-Christmas.

Australia is set to see thunderstorms and heavy rain this week, which may hinder harvest progress. 

 FERTILISER

• Urea/AN

This week the market revolves very much around European and UK gas values, as well as the continued firmness in ammonia. European gas has been trading at €47/MWh and UK gas is at £1.17/Therm.

The ramifications of these values imply an exponential rise to come in the production costs of ammonium nitrate across the continent and we're seeing both domestic and European producers cut production and even withdraw from some markets, most notably in the EU.

Meanwhile, imports into the UK of all nitrogen products are trailing last season's (2023/24) imports by some considerable margin and suggests possible issues with availability and delivery schedules into the new year.

With regards to urea, India has secured more than one million tonnes of product in its latest tender which has provided a stable footing for producer values into Europe and the UK. Adding weaker currency into the equation will firm values going forward.

• Liquid/UAN

Sales and availability of UAN remain steady as we head deep into quarter four of 2024. Suppliers and shippers are keeping a close eye on requirements in quarter one of 2025, as UK farmers continue to drill crops following favourable weather conditions. Those who are drilling after root crops, they're doing so in much better seedbed conditions than originally thought possible.

Demand for UAN as we head into spring 2025 looks positive because of the larger cropped area and different buying patterns. Make sure you plan well ahead of full season requirements – this allows smoother logistics to cover spring tank fill rather than a last minute scramble, but also gives suppliers the opportunity to cover any addition volume requirements to the end of May 2025.

• PKs/Straights

Phosphate values remain stable for the time being, however, new cargoes are pricing into the UK slightly firmer once again and currency is factored in.

Potash looks to have bottomed out and is the lowest cost it has been for some time. This offers a good opportunity to replenish stocks and ensure crops are given the correct nutrition, resulting in optimum yield.

Given our winter cropping areas look to be in good order and weather has been favourable, we advise you to take cover on a large percentage of your needs and ensure it's delivered in good time.

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