Frontrunner - 23rd September 2022

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WHEAT

• Wheat prices rally sharply

London wheat futures rallied to their highest point since the 11^thJuly this week as a result of escalating tensions between Russia and Ukraine. President Putin said he was mobilising 300,000 additional reserves and announced other activity that has concerned markets. The comments from Putin saw Chicago Board of Trade (CBOT) wheat futures rise by over 7% as the shorts covered their positions fearing disruption to essential Ukrainian agricultural produce exports.

Meanwhile, analysts across the board are raising their Russian wheat production estimates. On Monday, the Institute for Agricultural Market Studies (IKAR) updated its Russian estimate to a new record high of 99 million tonnes, predicting an export potential of 47 million tonnes. SovEcon now puts the Russian crop at 100 million tonnes.

By the end of last week, speculative funds had built a significant short position in the region of 40,000 contracts (five million tonnes) on CBOT wheat futures. This was on the back of a strong dollar, recession fears, lower global demand and slowing US wheat exports.

• Ukrainian wheat production falls

The continuing conflict in Ukraine is having a long-term impact on its wheat crop production and it seems unlikely it will offer any significant volume on the world market.

This week, the Ministry of Agrarian Policy and Food of Ukraine said it sees the winter wheat planted area in Ukraine falling by at least 20% on last autumn to around 3.8 million hectares. The 2022 harvest is now complete and estimated to be around 19 million tonnes. Farmers were only able to harvest 4.6 million hectares of the six million hectares drilled due to Russian occupation.

Ukraine's deputy agricultural minister has reported that the 2023 wheat harvest could reach between 16 and 18 million tonnes, which is only half the volume of the record crop achieved in 2020. Its domestic needs are around ten million tonnes.

• Mixed potential in South America

There are contrasting fortunes for wheat production in South America. Argentina continues to endure dry weather and this week the Rosario Grain Exchange made further cuts to its 2022-23 estimate, taking the total figure down from 17.7 million tonnes to 16.5 million tonnes. The United States Department of Agriculture (USDA) maintains the highest estimate at 19 million tonnes.

However, in Brazil the outlook is very different. Leading Brazilian agribusiness consultant SAFRAS & Mercado sees Brazilian wheat production up to 10.935 million tonnes; this is significantly up on the previous year's total of 7.745 million tonnes. Currently, Brazil imports approximately 6.5 million tonnes annually, most of which traditionally comes from Argentina. 

BARLEY

• Complex market drivers for feed barley

It has been a quiet week for feed barley, with complex global grain macros and uncertainty from the Black Sea region dominating the direction of the feed barley market. Fresh export demand remains very muted and the discount between feed wheat and feed barley has widened.

• Malting barley premiums under pressure

The malting barley market has also been reasonably quiet this week. The domestic market looks to be well covered, especially in the pre-Christmas positions, with only merchant shorts as buyers. Malting premiums remain under pressure, which is prompting some to market barley that is of borderline malting quality as feed to manage their risk.

​OILSEED RAPE

• Concerns for rapeseed supply chain

Rapeseed markets have closed out the week around £10/t higher than where they started on Monday. This is down to two primary factors: escalating tensions in Ukraine and fears for a smaller than expected Canadian canola crop.

• Fears Black Sea export corridors will be affected

The situation in Ukraine is becoming more volatile as President Putin has implemented a referendum in the Eastern areas of Ukraine with high Russian occupation. This has raised concerns that Black Sea corridors will be affected and exports into Europe will be limited.

• Lower than expected Canadian canola crop predicted

The Canadian canola harvest is being followed with interest after early reports of lower than anticipated yields. Subsequently, MATIF futures were boosted and closed €25/t higher on Thursday.

This is a developing situation that the trade will be watching closely. However, at present, the Canadian harvest continues to progress steadily with expectation of a crop at 19.5 million tonnes.

Otherwise, the rapeseed market feels well supplied going into the winter period with continued trade of Canadian and Australian supplies in Europe coming available at the end of this year and into next. 

 PULSES

• Feed bean values fall against wheat futures

As more feed beans are being marketed for October and November, we are seeing values fall in comparison to wheat futures. This demonstrates that there is little demand currently for feed beans at their current levels.

• Exchange rates may dictate demand

Predicting a return of demand is difficult, but exchange rates always play a role. A weaker Sterling against the dollar would make importing midrange proteins the more expensive option for compound feed buyers.

There is still minimal demand for human consumption beans despite weaker Sterling and, given more aggressive pricing from the Baltic and Australia, there is less chance of seeing that demand return in the short-term.

 FERTILISER

• Nitrates and urea

It has been another quiet week in the fertiliser markets as favourable weather sees growers busy drilling crops.

The urea price has firmed in the UK once again, which is mainly due to current exchange rates. Similarly, ammonium nitrate prices have firmed, which is due to the limited nitrogen options that are available and accessible within the UK.

Many European factories that produce ammonium nitrate are still closed as a result of high gas prices causing material supply issues. However, SUSTAIN is still very well priced against ammonium nitrate and offers an attractive alternative solution.

Currently, the UK's only means to source ammonium nitrate products is via import, but these options are expensive in comparison to SUSTAIN on a cost-per-kilogram basis.

Polysulphate is another good value option as a sulphur source, especially for growers who have bought straight ammonium nitrate to fertilise their crops.

The energy price cap may have an impact on operations for UK fertiliser manufacturers in the coming months. In the meantime, please speak to your Frontier contact for the latest advice and recommendations.

• Liquid

After several weeks of most UAN suppliers running a POA position, this week saw suppliers announce fresh offers on UAN for both autumn and spring delivery. Pricing is available on all grades across the portfolio; however, tonnages are limited.

These new levels show a sharp price increase on previous offers as European UAN supply remains impacted by reduced production at manufacturing facilities. Suppliers therefore continue to source from further afield which incurs additional freight costs and varying vessel size availability. This limited tonnage offers growers who have secured a percentage of their tonnage for this season the opportunity to cover additional requirements, especially as cropping is confirmed and cereal drilling continues in some regions. Once these offers are sold, we expect to move into a prolonged POA period before additional volumes are sourced by suppliers.

• Phosphate and potash

Demand for phosphate and potash remains steady while growers are drilling and prices remain stable. With huge amounts of straw bailed over harvest, it is advised to replace the nutrients that have been removed to ensure a profitable crop next year. Even at current prices, replacing lost P and K is an economical choice. Please speak to your Frontier contact for up-to-date pricing.

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.