Frontrunner - 25th January 2019

WHEAT

• Firm pound pushes old crop prices lower

Brexit uncertainty continues to fuel huge shifts in the value of the pound. This week the pound appreciated significantly against a host of other currencies reaching 1.16 against the Euro, a level which was last seen in May 2017. Domestic demand for old crop remains strong, but if the UK has an exportable surplus then a firm pound will not help us trade with foreign buyers.This could potentially weigh on values.

• New crop void of demand

There is currently an £18/t discount from old crop to new crop futures which indicates either old crop is too expensive, or new crop is too cheap. New crop is sitting at a discount to compete with French wheat which does suggest the UK is relatively cheap, although the UK consumer seems in no rush to take forward cover. Global weather remains benign, UK crops look generally well ahead and in good condition, with an increased acreage of wheat in the ground. There is currently nothing to suggest new crop prices are going to rally in the short term. In light of this, it would be wise to consider hedging a proportion of your crop at current ex farm prices if you can return a profit for your farm business.

• Argentinean harvest complete

Global 2018 wheat harvests concluded last week with Argentina one of the last to park up the combines. Despite inclement weather, most traders are putting the Argentinean crop around 19 million tonnes, which falls short of the US Department of Agriculture's (USDA) 19.5 million tonnes prediction. Quality has also held up remarkably well which is good news for their export campaign if they are going to compete with Europe into North Africa.

BARLEY

• Feed barley values fall significantly

Feed barley values have seen significant declines this week. The mid week tender to Tunisia and Jordan saw barley offered at lower prices again and traded at values below recent UK prices. As prices fall the discount to wheat widens and barley looks more attractive again to UK compounders. As a result we have seen a higher demand in the UK although at lower price levels. With lack of export demand it is particularly difficult to find homes for feed barley in South east England where the market has seen good support throughout the winter into the ports.

• Malting barley market stalls

Recent declines in EU export values have finally had an effect on the UK malting market. Few domestic bids can be found today as sellers hunt around for outlets for remaining farm parcels. With most end users well covered for the rest of the season they are happy to sit out of the market for the time being and watch values decline. Even the strong market for Propino into East Anglia has seen a fall this week as export cargoes are cash settled, increasing the domestic supply.​

​​OILSEED RAPE

• Flat old crop markets

There is limited news on the oilseeds markets. There continues to be more focus on political issues, such as the US/China trade dispute and the value of sterling during the Brexit process, rather than stock levels or shifts in demand. Long holders of old crop OSR in the UK have been faced with a relatively dull market in this post harvest period. A quick check of the forward mid month value since September of physical OSR for March delivery into Liverpool shows near identical values. Despite all that's happening, it has been a very flat market.

• All to play for on new crop

New crop trading is slow with only a few growers managing risk by selling limited tonnages. Futures prices in Paris for the 2019/20 season are very similar to those for old crop implying that the balance in the market in Europe is not expected to change. However there is a long way to go until we see the combines back in the fields.​

 PULSES

• Export trade

Little fresh news on old crop markets this week with feed beans largely priced out of UK domestic consumption and the majority of better quality lots already moved off farm for the human consumption export trade. Attention has therefore switched to prospects for new crop markets.

• Winter beans

Winter beans are progressing well in near ideal weather conditions and there is no doubt that farmers will want to plant more spring beans in the next couple of months after the favourable prices of this season. Futures based feed contracts are available on much better terms for harvest '19 and it remains to be seen whether certified and home saved seed supplies will be sufficient to meet demand. ​

 FERTILISER

• First application

Markets have been relatively settled this week with all suppliers now out with terms for Feb onwards. CF fertilisers have resumed production at all sites and, as such, the focus now turns to delivering the backlog of orders to farm in time for what may be an early start to application of first dressing to arable crops. Trade estimates, backed up by import statistics indicate that the market for Nitrogen and Nitrogen / Sulphur is only 75% - 80% committed, this means many growers will have additional volumes to buy and with a busier than expected spring we would encourage orders to be placed in good time.

• Urea

Whilst we wait for the details following the announcement relating to the Clean Air Strategy it is clear that Nutrient Use Efficiency is under the spotlight in relation to ammonia loss from fertiliser, whilst the headlines are around the use of Urease inhibitors for Urea fertilisers. There are other mitigating practices that could be used from switching to Ammonium Nitrate based fertiliser or incorporating Urea based fertiliser following application.

• Brexit

We are getting a number of questions around Brexit and fertiliser supply – the key here is importers are running very tight books as we wait for some clarity on what the "deal" may be. This means at certain times key materials may be in limited supply – yet more reason to book in plenty of time. ​

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