Frontrunner - 26th April 2019

WHEAT

• UK demand dwindling

Old crop futures and physical prices continued to feel the pressure this week as buyers proved hard to find. Consumer buyers remain absent from the market and their hand-to-mouth approach seems to be working, as May LIFFE futures lost another £3 since returning from the Easter break. We have now entered the first notice period for London futures, so we will begin to build a picture of where parcels of wheat will be tendered. A large volume of contracts sit on the exchange untraded, so we may see a significant quantity of physical wheat hitting the UK market in the short-term which will compound the downward pressure on prices. There is still a £16 discount from this crop year to next season ahead of large forecasted European crops but it feels as though the window for an old-crop rally is becoming increasingly narrow.

• Weather shaping new-crop markets

Prospects for global crops are still positive in the absence of any real weather events. Widespread rainfall across the US plains and Midwest caused little or no dent for crop ratings, which currently sit at 60% good/excellent versus 30% a year ago. Canada's latest set of crop planting intentions also painted a bearish picture. At 25.7 million acres, the total wheat area has increased nearly 4% year on year in place of canola which saw a 6.6% reduction. As such, US corn and wheat futures have traded down to contract lows, with US corn having to further discount itself to compete with cheap South American export prices. In the EU, rain in the seven-day forecast will come as a welcome relief to wheat and corn growers, particularly in the west where crops have struggled with dryness.

The fact remains that global speculative funds hold huge short positions in corn and wheat and, until something changes in the weather forecasts, it's difficult to see where support for wheat prices will come from.

BARLEY

• More activity on old crop feed barley

Following the Easter break, this week has seen more activity both on the farm selling side and for export opportunities from the south of England. Sellers of volume from farm are mainly in the Midlands, while UK demand into the ruminant sector remains quiet as winter requirements come to an end. Pig feed producers have upped barley inclusion to the maximum to take advantage of the large discount to wheat that we see currently. Barley supply from farm and merchant stores is more than adequate to supply any extra demand we have seen so far. Wheatfeed also remains good value for the summer months, giving end users another opportunity to buy other raw materials competitively. As a result, feed barley values have remained static this week.

• New crop feed barley values remain under pressure

This week, rain in Spain and North Africa has reduced the expected import demand for feed barley into these areas. This is a bearish signal for UK new crop export values.

• Malting market remains quiet

With France also experiencing wet weather, sellers have reappeared in the European market place. However, concerns still exist due to a lack of rain in Northern Europe. The potential for drought damage to the Danish spring barley crop is still an area to watch.

Recent showers across the UK will have certainly done some good, however, the southeast remains dry with very low ground water levels and, up to now, very little April rainfall to speak of. With an area of low pressure crossing the UK this weekend, it will be interesting to see if this changes.

​OILSEED RAPE

• Oilseed rape markets have firmed on the week

A combination of rising futures markets and weaker sterling have helped to boost farm gate values. European rapeseed markets stand very much on their own set of fundamentals at this moment in time. OSR markets have held strong in the face of plunging US soybean values.

• Reduced crop area

On Wednesday (24^th April, Statistics Canada forecast that canola plantings will be 6.6% down year on year – a decline of 1.5 million acres. The current dispute with China, coupled with falling prices, has clearly swayed some growers away from planting the oilseed crop. The planting season is underway in Australia and although some areas are drier than growers would like, canola crops are being drilled. 

 PULSES

• Welcome rain for spring crops

The recent rain has been very timely for spring grown pulses which, although drilled into near perfect seed beds, have grown slowly due to the cool dry weather over the past three weeks. The impact of pests is evident, with these slow growing crops more prone to damage from pea and bean weevil and thrips, especially on limestone brash soils.

• Market values remain broadly unchanged

Until we see more crop development both in the UK and the Baltic states – or any fundamental change in sterling – we don't envisage any short-term major price movement.

 FERTILISER

• ​Brexit uncertainty stalls market movements

This week saw no change in CF Fertilisers' nitrogen market, with limited import options due to the continued uncertainty with Brexit. The global urea market firmed on the back of increased demand from the US, leaving very few options for Europe other than to sit out regarding new season offers.

• Straights

Most of the UK is sorted on this season's P and K requirements but some attractive offers are coming through on straight phosphate and potash. Speak to your local Frontier contact for more information.

• Liquids

The foliar market has started with products for oilseed rape, designed to keep the canopy greener for longer and lead to increased yields. Products are also available for milling wheats to help improve protein levels. For more information, please speak to your Frontier contact. 

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