Frontrunner - 22nd July 2022

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WHEAT

• Ukraine export deal

After weeks of talks and negotiations, Turkish officials said that a deal to allow safe Ukrainian grain exports from Black Sea ports would be signed at a ceremony in Istanbul on Friday 22^nd July 2022. Russia and Ukraine are reported to have reached agreement with the UN and Turkey although at the time of writing there has been no official confirmation from either Russia or Ukraine and the details of the agreement have not been released. However, in his evening video message to the Ukrainian people, President Zelensky said he expected news from his officials in Turkey regarding the unblocking of his country's ports. Over 80 grain ships carrying over 20 million tonnes of grain are said to be stuck in Ukraine's Black Sea ports as a result of the conflict with Russia. With the 2022 wheat harvest underway, some farmers remain choked with old crop with nowhere to tip their incoming harvest until Black Sea shipments can resume.

• Earliest UK wheat harvest since 1976

Combines have been busy cutting wheat this week across many English counties with the earliest widespread start to the UK wheat harvest since 1976 gathering pace. In general, favourable yields have been reported and there is exceptional specific weight quality of over 80 kgs/hl. Proteins are very wide-ranging with results coming in at both below 9% and above 14% across the range. We're seeing robust Hagberg falling numbers, although screening levels are high. The record-breaking UK temperatures on Tuesday brought a temporary halt to harvest and concerns for field fires. There were also concerns that wheat moisture content would fall below 10%. Rain arriving in some areas today should help address that issue with further showers forecast. However, with temperatures again forecast to rise over the weekend before settling next week, the country's wheat harvest will gather pace and provide a more reliable picture of the crop quality.

• EU dominating wheat exports

European wheat futures prices gained 6% this week on last week's lows as the EU harvest progressed and exports and fresh sales gathered pace. The French wheat harvest reached 84% complete, compared with just 50% the previous week and just 12% at this time last year. Some of last week's price weakness has been put down to the harvest pressure that the fast early pace created.

On the world stage, France, together with other EU countries, is said to be maintaining a record-breaking export pace with EU wheat exports to 10^th July up to 364,000 tonnes compared to 294,000 tonnes last year.

France has taken the lion's share of further confirmed wheat sales to Egypt this week. The General Authority for Supply Commodities (GASC) confirmed purchase of 640,000 tonnes in total. 360,000 tonnes of this were purchased by France and a further 30,000 tonnes each by Germany and Lithuania. Russia purchased just over a third - 220,000 tonnes - which is significant considering that this time last year sales to Egypt were dominated by Russia and Ukraine. Shipment will be during the second half of September through to mid-November. Russia has only able to secure the nearby slot due to the uncertainty of its export tax calculation in forward positions. Meanwhile, analysts have raised their 2022 Russian wheat production estimate to over 90 million tonnes. There were rumours of French wheat sales to China which also encouraged Paris futures higher.

​OILSEED RAPE

• Yield improvement in Europe

This week rapeseed prices saw sharp declines on the back of improved yields across Europe in some of the main producing areas including Germany where this year's rapeseed crop may reach four million tonnes, which would be a five-year high and up 11% on the year. Harvest pressure is undoubtably weighing in too, with strong European crops flooding onto the market trying to find nearby homes.

• Chinese vegetable oil imports at a 7-year low

Other factors weighing in on the oilseeds complex this week included improving weather for US soybeans where dryness was previously a concern. Chinese demand for US beans has finally started to pick up, but the demand is still reduced as a result of Covid-related lockdowns. In June, China imported its lowest volume of vegetable oils in seven years, which was a cause of concern for markets.

• Black Sea safe corridor negotiations underway

Turkey, Russia and Ukraine have been negotiating an agreement to open a safe corridor in the Black Sea for exports from Ukraine, although terms of this are still unclear. Wider grain markets reacted violently to this. Markets will continue to watch the situation to see whether Ukraine will finally be able to move its heavy surplus of grains and oilseeds.

 PULSES

• Hot weather triggers harvest

The hot weather has accelerated the pace for some bean crops and some have now been harvested in Kent and East Anglia. Early yields look fair considering the speed of ripening, with first reports ranging from 3.5-4.5 t/ha, harvested at 12-13% moisture. In other parts of the country many crops are still very green and look to be at least 3-4 weeks away from harvest.

• Limited bean demand generates discounts

Demand for beans is still very limited with buyers unable to take early supplies, so these will have to be discounted in value to pay for the cost of haulage and rental to local stores. Market values continue to closely follow the wheat market but, if yields look set to increase, then premiums to wheat will soon be eroded.

 FERTILISER

• AN/urea/liquid

This week, India tendered for 500,000 tonnes of urea. This tonnage was below expectations and may highlight some short-term availability concerns from suppliers, especially as Russia may be involved in tonnages offered. Given that India is a huge consumer of urea, this could give an insight as to what direction future prices are heading.

UK offers for urea are still competitive in the market and growers still to buy should consider Sustain treated product, which offers good value against AN with the added bonus of safeguarding against volatilisation and offering a later delivery period.

As mentioned in last week's Frontrunner, UK AN increased considerably on higher UK and European gas futures. Gas prices remain volatile and the risk of values increasing remains high especially for autumn/winter usage.

Liquid UAN offers remain within the market for autumn and spring delivery and offer excellent value as well as a balanced approach to crop nutrition, delivering the correct nitrogen-to-sulphur ratio.

• PKs

Phosphates and potash markets remain stable with little buying interest due to the current ongoing harvest. It's worth noting that replacement values may be affected by a weaker pound-to-dollar exchange rate and our continued advice is to buy the requirements you need in the short term. New supply lines are being sought with Belarussian and Russian origins, but the longer-term market will be heavily dependent on whether sanctions remain in place.

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