By Frontier Trading Desk on Friday, 25 June 2021
Category: Market information

Frontrunner - 25th June 2021

Wheat futures have slipped lower this week. London November 2021 wheat futures closed below £170/t for the first time since mid-April. Grain markets have been pressured by wetter and cooler weather across the primary US corn producing states, which are conditions that are ideal for the pollination period and signal improved yield potential.

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WHEAT

Wheat futures have slipped lower this week. London November 2021 wheat futures closed below £170/t for the first time since mid-April. Grain markets have been pressured by wetter and cooler weather across the primary US corn producing states, which are conditions that are ideal for the pollination period and signal improved yield potential.

Speculative funds have been active sellers, reducing their long corn futures positions, which has also helped to lower wheat prices. The US winter wheat harvest advanced rapidly, up 13 points on the week, and is now around 17% complete, which is adding some harvest price pressure. In contrast, the northern US states have stayed mostly dry and expanding drought is proving increasingly damaging for spring wheat crops. Only 27% of the crop is rated as 'good' to 'excellent'; a fall of ten points on the previous week. This is the worst condition index fall recorded for the week since 1988 when there was 25% abandonment. Increasing concerns for the supply of high-quality bread-making wheat has seen Minneapolis spring wheat futures rise by over 6% this week.

Brussels published its latest EU-27 balance sheets this week, trimming 1.8 million tonnes from its total grain production estimates for the coming season. It sees wheat 400,000 tonnes lower on the month at 125.8 million tonnes, but this is still 8.6 million tonnes up on the year. This is mainly due to a recovery in French winter wheat planting.

However, despite the jump in production, increased domestic demand and exports are expected and this will leave the carry out stocks 700,000 tonnes lower on the year. Competition in export markets could be fierce with improving production prospects for the world's leading wheat exporter, Russia. This week, analyst group SovEcon increased its Russian wheat crop estimate from 82.4 to 84.6 million tonnes, highlighting a larger drilled area and favourable growing conditions. France is enduring excessive rain and its winter wheat crop ratings slipped two points this week to 79% rated 'good' to 'excellent'.

The International Grains Council sees a significant rise for Chinese corn production for the 2021/22 season in its latest monthly world supply and demand estimates. It sees China producing 272.8 million tonnes, up from a previous estimate of 267.3 million tonnes. It also sees world production up nine million tonnes to a new total of 1.201 billion tonnes, which would be 70 million tonnes up on the year.

At 789 million tonnes, wheat is one million tonnes below last month but still 16 million tonnes up on the year. Despite these significant annual production increases, rising consumption estimates will leave minimal changes to world year end stocks. Wheat stocks will increase by only three million tonnes and corn will remain unchanged, highlighting the need for higher world production estimates to be realised.

SEED

The overall outlook for UK winter cereal seed crops is good, with both winter wheat and barley yields looking promising in marked contrast to this time last year. However, there are always commodities where demand outstrips supply. For this autumn, growers should be aware of the following issues.

The UK hybrid barley market looks to be in deficit for this autumn. Poor yields of seed crops in 2020 resulted in no carry over stock and divergence of varieties between the UK and Europe mean there are no continental stocks to supplement our seed supplies. With hybrid barley seed orders already at 65% of last year's total, variety options are narrowing fast and an early sell out is possible. If you plan to grow hybrid barley in 2021/22, do not delay ordering your seed.

With open days, agricultural events, and trial site visits dominating the calendar in June, it is no surprise that seed orders for eye-catching or promising new varieties have been coming in thick and fast. As is always the case, some varieties have seen particularly strong interest and are likely to sell out in the coming days. High yielding new wheat varieties like KWS Dawsum and KWS Colosseum have been particularly sought after, whilst the new top-yielding conventional barley KWS Tardis is also in high demand. If you're planning on benefitting from the latest developments in seed genetics, whether it is new yield-toppers, strong disease resistance, or even BYDV resistance, speak to your farm trader or agronomist now.

If you haven't been able to get to a variety demonstration site and you need information on the options for this autumn, take a look at our digital My Varieties seed catalogue now. The online catalogue is full of information on varieties of winter wheat, barley, oats, rye and oilseed rape, as well as advice on seed treatments and establishment.

Keep an eye out for our virtual open day videos as well. They'll be landing on our YouTube channel next week with content on all of the key new varieties for 2021. 

BARLEY

Old crop values have found some support this week with very little grain left on farm finding its way to the market. Demand is limited to trade shorts in most regions with compound demand for old crop minimal given its significant premium to new crop values. With demand limited, barley is travelling longer distances which is putting pressure on end-of-season logistics.

Over the last week, most parts of the UK have seen beneficial rains especially for the spring barley crop after a dry and warm start to June. Crops are generally looking good in most parts of the UK with harvest fast approaching. Domestically, barley remains at a £13-15/t discount to feed wheat with values remaining fairly flat this week and farmer selling and compound demand remaining slow. Export interest at this stage has been limited to the Spanish market but with both sterling and the euro weakening over the second half of the week, there is trade on the horizon.

On the global market, European barley crops look to be in a good condition, particularly in the west, as harvest gets underway in France. Beyond Europe, Canada has endured the warm and dry weather similar to conditions seen in the northern US plains where crop ratings have fallen in recent weeks. Meanwhile, Argentina is currently just under halfway through planting its new season barley crop. These three regions will once again look to China as a key export market for crop 2021. Demand in China in recent weeks has been quiet after a spate of purchasing earlier this year. 

​OILSEED RAPE

Markets feel as though they are in a period of transition. Prices have been on a 12-month bull run with the benchmark US soybean futures at the start of this month having appreciated by over 75%. Demand recovery after the initial Covid-19 related lockdowns and relentless Chinese buying have been the main drivers of firming prices with global stocks seen at critically low levels in the key exporting nations. On this latter point, however, there have been a number of forecasts that global oilseeds stocks are likely to be rebuilt during 2021/22 and this has taken some of the heat out of markets. However, there is still a way to go before crops are secured and unknown weather factors to consider, particularly in the Southern Hemisphere. As there is no major production problem evident currently, prices are likely to remain on the defensive.

Traders are marking time before the release of the crucial June Stocks and Acreage report from the United States Department of Agriculture (USDA) next Wednesday. This is expected to be a key event given that the report will give markets a better insight on the final soybean planting figures and will also most likely address the apparent issue of understated demand in previous reports. Low demand has been needed to maintain year ending stocks above the minimum required to get from one season to the next.

Rapeseed markets will always trade in relation to other oilseeds, given that for some processes one type can be substituted for another. However, the rapeseed sector remains the one with the biggest supply issues. Paris rapeseed futures have been firm over the last week with the key November contract managing to once again break €500/t. This is a reflection of the anticipated tight supply situation in 2021/22 with Europe banking on plentiful supplies from Canada and Australia to plug the deficit. Earlier this week, Canadian canola futures were trading at limit up following reports that much of the southern prairies are experiencing low moisture levels once again after a series of dry years. Eastern Australia is seeing rain showers this week and more extensive rain in the west is expected next week. However, there is a long way to go before the combines really start rolling in November for this part of the world.

 PULSES

With more reductions in wheat values this week, beans have followed suit with prices falling £2-3/t depending on location. The weather conditions have been near perfect for bean plant development with minimal damage seen following the exceptional rains in the southeast at the end of last week. A few more growers are realising the potential of this year's crop and are making forward sales at over £200/t for feed beans with premiums if suitable for human consumption. With further declines likely in wheat values and little prospect of a crop-damaging heatwave, further falls in feed bean prices are expected next week.

 FERTILISER

Both CF Fertilisers and Yara have withdrawn terms this week from the UK market for nitrogen and nitrogen sulphur grades. Some limited stocks are available for grassland use. New terms should be available early next week.

The ongoing global volatility in the ammonia and urea markets is continuing to have major effects on the nitrate market. Raw material prices are still firm and rising in the case of gas prices, which were nine pence per therm this time last year, but which now stand at 77 pence per therm.

India is expected to soon announce another tender for a significant volume of urea. Latest predictions suggest this could exceed one million tonnes. With the current limited supply, this could well move prices even higher. In the UK, granular urea delivered on farm currently stands at around £375-395/t.

MOP/TSP and DAP have all firmed again during the week. More increases are expected before they hit replacement levels. As always, it is advised to speak to your local Frontier contact for an update on the market.


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