Frontrunner - 25th August 2023

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WHEAT

• UK harvest complete for many

Many UK farmers crossed the finish line this week, bringing a welcome end to one of the most challenging harvests for over a decade. Continued periods of rain delayed combining – a complete contrast to last year's harvest where prolonged dryness allowed for the earliest and quickest harvest since 1976.

Testing so far has presented a variable yield with wide ranging quality, again a sharp contrast from the vintage high quality 2022 crop. The rain delays have had an impact on Hagberg across many areas of the country, but not consistently. It isn't yet clear whether this is down to varietal differences, has been caused by drilling dates or is simply luck of the draw with rainfall. However, a comprehensive sampling and testing programme will be needed for any bulk of wheat looking for a market other than feed.

Group 1 milling premiums at the farm gate are already at the top end of any premiums achieved last season, when protein was in short supply. Average protein in Group 1 wheat is marginally higher, but not notably so. However, there are Hagberg and low specific weight issues this season which will see a greater percentage of the crop in the feed bin. A total of 16% of C2 seed sales for the 2023 crop were Group 1 varieties compared with almost 20% the previous season, which suggests that there will be a shortfall to meet domestic bread wheat needs and therefore imports will be needed to fill the gap.

Similar weather in northwest Europe has resulted in quality issues in many countries, including Germany where the UK sources its cheapest alternative bread wheat supplies. German prices have also been rising because of its quality concerns.

Other than Group 1, UK wheat in general is lower in protein with a notable volume sub 10%. This is very unusual but symptomatic of the record high fertiliser prices seen last year.The vast majority of Group 2 wheat, particularly Extase, is well below 12% protein. This means that there are limited alternatives to Group 1 wheat for UK millers who use it in their bread grist. Much of the variety will end up in feed as a result, but its low disease and high yield will see it remain a farmer favourite this autumn.

• Ukraine crop getting larger

According to the Ministry of Agrarian Policy and Food in the Ukraine, the country's wheat harvest is complete and the end results are well above early estimates.

Given the loss of area to the conflict with Russia and challenges securing adequate inputs such as fertiliser, analysts predicted at the beginning of the year that the crop would produce little more than 17 million tonnes. However, beneficial weather leaves the crop at 21.94 million tonnes due to high yields. This is in line with last season but is well below the 2021 record of 33 million tonnes and leaves a higher-than-expected exportable surplus after accounting for a domestic need of just over eight million tonnes (it was 10.5 million tonnes two years ago).

The United States Department of Agriculture (USDA) estimates a crop of 21 million tonnes and exports of 10.5 million tonnes. Ukraine shipped almost 19 million tonnes during 2021-22, despite the conflict issues during the second half of that season.

• India hungry for Russian wheat?

This week market support came partly from heightened rumours of Russian wheat sales to India. It was also reported that Russia would raise its export 'floor price' in October from $270 to $280, free on board (FOB), although little has been sold at this price recently.

Russian exporters offered in volume at the floor price to Egypt this week, but Egypt bought just one cargo from Romania after it undercut the Russian offers by $14. However, if rumours are true and up to nine million tonnes of Russian wheat is sold to India, 30 million tonnes of Russian wheat will remain for the rest of the season - far less than other exporters have to compete with.

Highlighting its food supply issues, India is banning sugar exports for the first time in seven years and its August monsoons are the lowest on record, which go back 122 years. In contrast, Russia has enjoyed ideal wheat growing weather in many regions, with yields up on expectations and a crop now believed to be above 92 million tonnes.

BARLEY

• Farm selling slows down on feed barley

Feed barley markets have picked up slightly in the last week, with a lack of supply coming forward to the market.

Harvest pressure has now disappeared, with the winter barley harvest having been completed two weeks ago in most areas of the country. Additionally, feed barley values have eased back to circa £15 per tonne from the highs seen as recently as a month ago, which has not supported farmer engagement.

With a slower supply to the market, the domestic discount to wheat has narrowed slightly to circa £17-£18 per tonne where there has been interest from compounders looking to cover winter sales. Export demand remains quiet, with UK prices not seen as being competitive to what is traditionally its largest export destination, Spain, and with limited interest from other European importers. UK barley will need to be competitive both domestically and for export in order to find demand for a crop that will have a sizeable exportable surplus.

• Malting barley premiums still high

Malting barley premiums for both the harvest and forward positions remain high and as a result look attractive to farmers in contrast to current feed barley prices.

Harvest has progressed well in England during the week, with little disruption, with the spring barley harvest also starting in Scotland. While quality in England has been good, early results from Scotland have shown a lot of variation, though more data should be collated in the coming days.

OILSEED RAPE

• Rapeseed market battles with heavy supply and demand picture

Markets have been trading on more traditional factors this week including physical oil demand, global crop sizes and supply and demand realities.

Factors such as the Black Sea conflict and other geopolitical issues have had much less of an effect on the market, despite news stories that would have caused knee-jerk reactions in the recent past.

Currently, the main bullish factor in the market is the dry and hot conditions in North America and the effect on the US and Canadian soybean and canola crops respectively. These conditions had been improving, but in the last week forecasts have taken a negative turn for crop condition and the dry weather is expected to last until mid-September. Despite this, the US Pro Farmer Tour (National Crop Tour) is underway and the group are reporting better conditions than the trade is currently working with. It would take a true disaster with the Canadian crop to cause any fundamental issue with global rapeseed supply and demand. However, a crop of 13 million tonnes like in the 2021-22 season would create some excitement.

Closer to home, the now nearly completed EU crop looks to have turned out well. It is estimated to be close to 20 million tonnes, which will provide a strong base for European crushers to originate from. It is worth remembering that this includes a large carryover stock from last year with keenly priced exports from Ukraine and Australia. This should be more than ample and could potentially lead to an even bigger carryover into the 2024-25 season.

 FERTILISER

• AN/Urea

Whilst volatility remains in the market, globally we have seen urea values soften slightly since the completion of the latest Indian tender. It is believed that this will be short lived and the change in levels relatively insignificant. At present, UK market levels remain stable due to lower buying activity as farmers continue to focus on completing harvest.

Benchmark gas prices across Europe rose around 10% this week, due to the threat of strike action at three liquefied natural gas (LNG) plants in Australia. Along with Qatar and the US, Australia is a key global supplier of LNG and the three plants involved provide 10% of the world's supply.

This news causes further concerns regarding the tight supply of nitrates and NPKs from Europe, as plant curtailments are still ongoing due to the higher production costs. UK gas prices have also experienced the same volatility and fluctuations, starting the month at 67.9p per therm, rising to £1.17 per therm earlier this week and at the time of writing having dropped to 93.9p per therm.

UK-produced ammonium nitrate (Nitram) is not directly affected by the volatility in the gas markets since the closure of CF Fertilisers' ammonia plant in Billingham. Production will continue using imported ammonia from its parent companies and we can currently offer Nitram for delivery into February/March 2024.

• Liquid

The progression of harvest led to a quieter trading week on urea ammonium nitrate (UAN). However, volumes of nitrogen and nitrogen sulphur grades continue to be booked where growers either have tank capacity for delivery this autumn or firm requirements for spring 2024 delivery.

Current values remain competitive against alternative options for those focusing on inputs for crop '24.

Suspension applications are underway in the east of the country where stubbles are cleared, following OMEX's announcement last month that its suspension fertiliser products will continue to be available until the end of this calendar year. Where growers require an NPK product for oilseed rape establishment, a range of clear solution grades are available in bulk and IBCs.

• PKs

It is believed that potash and phosphate values have reached the bottom of the market and are now leaning towards increases across muriate of potash (MOP), triple superphosphate (TSP) and di-ammonium phosphate (DAP).

Due to recent volatility in the PK market, importers have continued to hold lower stocks in the UK, resulting in a far more reactive marketplace. Indications show that global demand for potash could increase by 13-14% year-on-year, with South America playing an integral part in this growth. The outlook for the potash market is therefore forecast to increase steadily over the coming months.

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