Frontrunner - 26th September 2024

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WHEAT

• Price recovery stalls

Further speculative fund short covering helped wheat prices move higher earlier this week. London wheat futures recovered £3 from last week's low, although further gains to match other wheat futures markets were capped by another spell of sterling strength. The pound reached its highest level against the euro and the US dollar since April 2022, with investors attracted by the Bank of England leaving the UK base rate unchanged as the Federal Reserve cut US interest rates by 0.5%.

Managed money traders continue to reduce their short positions in agricultural markets due to concern over further Russian aggression in Ukraine and rumours of fresh Chinese buying interest. News of an explosion and fire attack on the Ukraine Black Sea port Odessa, damaging infrastructure and a civilian vessel, again highlighted the potential disruption to Black Sea wheat supplies, although both Ukraine and Russia continue to ship at a fast rate. With no confirmed Chinese purchases, wheat futures markets again eased lower.

• Mixed EU fortunes

Both Russia and Ukraine continue to dominate world trade, although there are mixed estimates for September Russian wheat shipments. Leading Black Sea agricultural markets research firm, SovEcon, estimates shipments to be below five million tonnes - compared to 5.7 million tonnes in August - whilst Rusagrotrans (a railway infrastructure operator transporting agricultural bulk cargoes) estimates 5.5 million tonnes, equalling last year's record pace. Ukraine wheat shipments from this year's crop have reached 5.3 million tonnes since 1^st July, which means over a third of the estimated surplus has gone before the end of the season's first quarter.

Weather continues to impact on drilling potential for 2025. Ukraine's Ministry of Agrarian Policy and Food expects its 2025 wheat area to be 4.48 million hectares, having previously indicated up to five million. Heat and dryness are impacting on next year's crop potential already, although the Ministry of Agrarian Policy and Food states that timely October rains - should they materialise - would see increased planting. In Russia, four Siberian grain regions declared a state of emergency due to excessive rain and flooding.

• EU and US contrasting export performances

EU wheat exports continue to struggle, even with a smaller surplus than last year. Up until 22^nd September, 5.855 million tonnes have been shipped compared to 7.675 million tonnes last year. This leaves an overall bearish outlook unless the pace steps up. The changing market dynamics and challenging market conditions can be appreciated when looking back to previous seasons. Algeria has traditionally been a key EU wheat buyer but has recently been targeted by Russian wheat exporters, meaning Algeria has only taken 413,000 tonnes so far this season. This is only marginally ahead of the UK in the list of buyers. Looking back to the same period during the 2018/19 season, Algeria had already taken 1.584 million tonnes from the EU.

US weekly wheat export restitutions were an impressive 711,000 tonnes - well above the high end of expectations - leaving the cumulative total shipped at 7.685 million tonnes. This is now 36% ahead of last year and is over a third of the season's United States Department of Agriculture (USDA) estimated exportable surplus. Corn was also an impressive 1.103 million tonnes, 200,000 tonnes above trader top end guesses. US exporters are helped by a trending weaker US dollar.

BARLEY

Compounders are well covered until Christmas and with farmers generally selling the nearby months we are seeing homes fill quickly from October to December. Post-Christmas feed barley still looks reasonably attractive to compounders at circa £20 - £22/t less than feed wheat. Feed wheat delivered premiums have firmed over the last couple of weeks - keeping feed barley pricing into domestic rations - and we continue to see buying demand for domestic feed barley.

Farm selling of feed barley continues at pace as growers assess the risk/reward of selling malting barley at small premiums. As a result, we are seeing spring malting barley sold as feed barley outside of East Anglia, the county where feed barley prices are the lowest in the UK and the highest for malting barley.

The Scottish harvest has advanced well in the last week on the back of dry conditions, however, wet weather has returned for the north of the country which will stop progress in the next couple of days. Yields have been mixed on the Scottish crop with better results being reported on lighter land compared to heavier soils, though quality overall has been good.

New crop winter barley drilling has started in many parts of the country, but significant levels of rain in the south of England have stopped further progress. The market will be watching what happens with new crop plantings, especially given what happened last autumn combined with the increased uptake of the Sustainable Farming Incentive (SFI) in England.

OILSEED RAPE

Rapeseed values have appreciated this week as vegetable oils extend their position as the firmest leg in the protein complex. This is due to declining EU vegetable oil imports and smaller domestic crops creating some supply tightness in the nearby. European growers remain reserved sellers at these levels and so far, much of the current EU crush this season has used imported seed, predominantly from the Black Sea.

Some concerns remain in Brazil where soil moisture is low for plantings, however, this campaign runs until December so there is plenty of time for things to change.

 PULSES

The bean harvest still has some way to go, with poor weather hindering progress this week. As harvest moves further north, yields continue to be very encouraging and well above the five-year average, following two years of lower yields. Domestic demand remains limited as alternative protein sources such as soya and rapeseed meal are viewed as better value by UK feed compounders

Quality issues in the Baltic regions continue as many crops are damaged by insects. This has increased demand for high quality UK spring beans with lower levels of insect damage. This window of opportunity will be brief, as a large crop of insect-free beans is expected to become available from Australia in the next two or three months. It is important to get spring beans tested for quality as soon as possible to find the best market.

 FERTILISER

• AN/Urea

Gas values in the UK and Europe remain volatile heading into autumn and winter and ammonia values remain high. This volatility is in part being caused by current geopolitical issues and is generating concern amongst AN producers in Europe and here in the UK. Production has been reduced in these areas and markets are being watched closely to monitor viability or whether a reduction or even a halt in production is necessary due to the high gas prices.

News of the latest Indian tender has been announced much sooner than expected, unusually overlapping the previous tender in terms of shipment. Volumes have yet to be declared and the tender has a closing date of early October, for shipment by the middle of November. Coupled with low stocks, heavy rains in India appear to have increased demand for urea in the country. China also continues its export ban, which may have had an impact on the previous tender as the tonnage was less than expected. This could also influence the forthcoming tender in terms of what tonnage is secured.

Egyptian urea production has resumed after a brief pause in gas supplies last week, however, reports suggest that factories are running on approximately 80% production. Egyptian urea values have increased by $30 since the end of August, which caused UK urea suppliers to withdraw prices as a precaution at the end of last week. Algerian producers are also expected to undertake maintenance works at some of their urea production plants.

With this year's grain harvest results showing lower than normal proteins, it is advisable to review nitrogen application rates for next year's crop. This amount of low protein hasn't been seen for approximately ten years and suggests that crops have been under-fertilised, especially as the wet weather last spring meant that nutrient was leached from the soils. Increasing applied nitrogen rates is advised to get the best premiums out of crops harvested for the coming year. Sulphur application is also recommended, either as a nitrogen sulphur product or as polysulphate if decoupled from nitrogen.

• Liquid/UAN

UAN values for product in both the autumn and spring delivery periods have remained unchanged since terms were first released earlier this summer and current UAN values continue to be competitive against solid AN fertiliser systems. At present, a full UAN portfolio of nitrogen and nitrogen sulphur grades is available. It is anticipated that values on NP and NPK products for autumn delivery will be available on a national basis in the coming weeks.

The competitive nature of current UAN values against UK nitrate based solid alternatives could be under pressure. The backdrop of a bullish urea market and firm nitrate prices will result in increased replacement values on UAN. These higher raw material costs will hit suppliers looking to cover additional volume aimed at restocking port-side storage to meet demand for the spring season in the coming weeks and months. Please continue to talk to your Frontier representative to discuss our liquid fertiliser product range.

• PKs/straights

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