Frontrunner - 23rd October 2020

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WHEAT

• Markets hit new contract highs

Earlier this week the world's futures markets continued to rise, extending their bull run that began back in August. US Chicago Board of Trade (CBOT) futures were close to a six-year high whilst Paris and London wheat futures each set new contract highs. Prolonged dry weather has been an increasing concern for wheat crops in Argentina, the US and Russia, and has latterly been the primary price driver. Each of these countries has received some rain, which is a benefit for some regions but mostly deemed insufficient, particularly for Russia where the forecast remains dry. However, a technical correction for overbought futures markets saw profit-taking on Thursday wipe out the 2% gains made earlier in the week.

• Algeria highlight inflationary wheat markets

Even with the world set to produce a record wheat crop and stocks set to jump by 22 million tonnes to a record 322 million tonnes, the world's major wheat importers currently face significant inflationary price pressure. This time last year Algeria bought 600,000 tonnes of milling wheat, paying $229/t including freight. However, this week, following its latest wheat tender, Algeria confirmed the purchase of 720,000 tonnes for December arrival, paying $276/t. This is $47/t above last year and represents a 20% increase in costs for Algeria's basic food needs.

• Uncertainty over Russia driving world markets

Concerns for the potential of the 2021 Russian winter wheat crop have been the primary price driver for the recent gains seen in world wheat markets. Soil moistures in Russia had fallen to record low levels and, although some rain arrived last weekend in some regions of Russia, it is thought it was too little to be a benefit. Despite Russia's 2020 wheat harvest being it's second largest ever at 83 million tonnes, a very fast export pace has contributed to Russian domestic flour prices rising to record levels. This has led to calls for the Russian government to build a strategic reserve to ensure its millers continue to have access to affordable future wheat supplies. This could, if approved, amount to between four and eight million tonnes and, in the process, cut the export availability. It is still to be established whether or not export restrictions will be introduced for the second half of the season from the beginning of January 2021. However, dry weather and high prices have encouraged many Russian farmers to drill record areas of winter wheat. Timely rainfall, which would benefit recently-drilled crops, might influence decision making and change the recent trend of world wheat prices.

BARLEY

• Values continue to firm for feed barley

Feed barley values have firmed further this week, with good demand for barley coming on the back of the increase in corn values. UK barley is competitive against other origins and it looks like there will be an active export campaign of coaster-sized vessels going to Europe from both England and Scotland between now and the end of December. The uncertainty and questions regarding potential trading agreements and tariffs after December remain unanswered and, as a consequence, many traditional long holders of feed barley are opting to sell before the end of December.

• High demand for low-nitrogen barley in the UK

It has been a relatively quiet week in the malting barley market. Export values have firmed as a result of the feed barley prices firming, but many domestic maltsters remain absent from the market and the only trade of note is to merchant shorts. Due to the high nitrogen levels in England this year, many maltsters have now moved to accepting barley up to 1.90N. It should also be noted that demand for low-nitrogen barley in England remains strong. Low-nitrogen Scottish malting barley continues to travel south to England and it is likely this trade flow will continue throughout the season.

• Covid-19 uncertainty continues

The uncertainty regarding malting barley demand as a result of Covid-19 continues and the whole sector is trying to forecast the impact of the recent restrictions on the hospitality sector. With individual regions now being impacted differently, this is extremely difficult. Looking forward, the next critical milestone in the brewing industry is the Christmas and New Year period. Whether consumers' usual drinking habits will change over the holiday season this year is still up for debate.

​OILSEED RAPE

• Contract highs

This week has seen contract highs being hit in a number of oilseeds related markets. Chicago soybeans have been driven higher by firm meal markets, whilst Paris rapeseed futures are up sharply to equal contract highs set in September, Canadian canola markets are up $25/t in the past four days, and Asian vegetable oil markets are still riding high despite concerns over weakness in the energy sector. Domestic rapeseed prices are up £5/t over the past week and currently sit at an impressive £50/t above levels traded back in March this year. Recent firmness has been fuelled by falling stock levels of all oilseeds in the major exporting countries following the recent heavy Chinese buying programme, as well as growing concerns about dry conditions in Europe and how this could impact supplies from the 2021 harvest. Short-term traders are watching for news from the Australian harvest which is just getting underway. Europe is relying on imports from this region for arrival in early 2021 and confirmation of good yields could have a dampening effect on local price levels.

• Demand concerns

With global oilseeds markets firming, it is the resurgence of Covid-19 in Europe that is the key concern on the demand side of the equation. European governments appear to be taking a particularly strong stance in trying to reduce infection rates by imposing further restrictions and lockdowns. We saw what this scenario did to rapeseed crush volumes back in the spring, with the impact felt in both the biodiesel sector, as people moved around less, and in the food sector, where restaurants, pubs, hotels and fast food outlets faced closure or restricted opening hours.

• Unpredictable exchange rates

The final factor in the mix is the value of sterling. This is acting like a barometer on where markets are viewing the probability of the UK getting a trade deal concluded with the EU in the next few weeks. This one could clearly go either way.

 PULSES

• Pulse markets hold steady

This week bean markets have sustained values despite little new demand coming into the picture. Feed values are still holding their own, just above the £200/t mark, with quality samples fetching relatively small £10-15/t premiums. Pea markets are showing growers good values across the quality spectrum with values now well up since the harvest period.

• Positive dehulled bean demand

Currently the market is seeing increased positivity around the use of dehulled faba beans in fish food rations, partly due to the rising price of competing high-protein wheat. This is good news for UK feed growers as it offers an outlet that can be more limited in a time where market conditions are different to those we are experiencing currently. Frontier dehulls beans for both animal and human consumption at its site in Ruddington, Nottingham. 

 FERTILISER

• Nitrogen

Earlier in the week CF Fertilisers and Yara revised October terms for all nitrogen, nitrogen sulphur and NPK grades for delivery from October through to January 2021. CF Fertilisers reduced its prices and gave the market a much needed boost, as many farmers are now near the end of drilling. Current offers are the lowest they have been in the last few years for this time of the year and compare very well against alternative import offers. Given the lack of imported ammonium nitrate volume and the uncertain position regarding the recent Indian tender, prices may well move higher as soon as the October volume is sold. If India confirms 2.2 million tonnes of urea from last week's tender, urea producers will be bullish for another month or so, leaving only a couple of months for UK buyers to buy and ship before we are into the usage period.

• PKs

Demand is growing for phosphates around the world and phosphate replacements tonnes for the UK have firmed. Currency fluctuations may help reduce the impact of higher TSP prices, but generally the current low prices are more likely to firm as we get closer to the spring. Potash prices are flat with very little news on potash supply. Demand will grow as crops emerge and brown fields turn to green and, with potash at historic lows, farmers may decide to store product ready for early spring applications.

Planning all nutritional requirements before Christmas is advised, as supply may well be affected by Brexit and the continued impact of Covid-19 on logistics in the coming months.

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.