Frontrunner - 27th July 2018

WHEAT 

• Volatile UK wheat prices

In reaction to further cuts to European wheat crop estimates, speculative trading and consumer short covering lifted the wheat market sharply higher this week. London wheat futures rallied to new contract highs on Thursday, with the November 2018 contract trading above £190.00/t.This was almost £15/t up on the previous week and £27/t up since the beginning of the month. However, the higher that prices go, the greater the potential for volatility and there are signals the market may be over-bought. With buyers pulling back on Friday by midday, London wheat futures traded £7/t below their Thursday high.

• Tighter world balance sheet

The International Grains Council published their July report yesterday and highlighted how cuts in production estimates for the world's major wheat producers are tightening the 2018/19 Global Balance Sheet. They dropped world wheat production by 16 million tonnes on their previous estimate to 721 million tonnes. This is now a notable 37 million tonnes down on last year. Carryover stocks are now seen falling 18 million tonnes on the year to 247 million tonnes.

• European wheat crop still shrinking

Yesterday, French consultant Offre & Demande Agricole (ODA) published the most pessimistic view on European wheat crop production for the 2018 harvest to date. They dropped the EU soft wheat below 125 million tonnes, which is five million tonnes below the last estimate from respected analyst Strategie Grain.

​OILSEED RAPE

• European conditions

OSR yields in Northern Europe continue to disappoint. This week, Oil World decreased the EU OSR crop by 600,000 tonnes to 19.5 million tonnes. This is a seven-year low in production.

With the Black Sea harvests now complete, good volumes of seed from Romania and Ukraine continue to price into the Northern European crush plants.

The EU and US agreed to relax current industrial tariffs and work towards 'zero' tariffs, barriers and subsidies which could help the US soybean trade into Europe. This should help replace some of the reduced demand for US beans from China but only to a relatively small extent. US soybeans are already trading into the plants that can crush them as they are the cheapest oilseed available today, whilst European rapeseed prices remain the highest in the world.

• World news

Conditions in Australia remain dry in the East with a small amount of rain in the West. This is leaving their canola crop in a less than desirable state.

US soybeans improved to 70% good to excellent (69% last week). This is notable as it is highly unusual for crop conditions to improve in the summer months. Soybean condition score at 378 is the fifth highest on record for this week of the year, and up from 375 the previous week. These statistics continue to hold a bearish effect over the Chicago beans market.

• UK yields

UK yields continue to be varied. Heavy land seems to have suffered the worst this year with medium land producing some of the better yields. As harvest progress moves up the country yields look to be improving as an average.

 PULSES

• Values continue to strengthen

The pulse market continues to follow wheat, with values hitting over £200/t ex-farm in many areas of the UK. The problem, as ever, is the ongoing hot weather raising further concerns over yield, especially on spring beans. Early harvested winter beans are yielding quite well considering the recent heat but quality remains an issue.

• Bruchid threat

Many of the samples we are testing show little outward signs of Bruchid damage with few holes or marks but, when cut open, the live beetle is still inside having not matured as quickly as the ripening bean. These samples will be unsuitable for human consumption as the Bruchid will emerge in transportation or appear when cooked. 

 FERTILISER

• Nitrogen

Last week we mentioned the possibility CF Fertilisers could withdraw from the market due to the UK discount to mainland Europe (YARA increased by 13 euros). This has now happened, with CF Fertilisers withdrawn on all grades. We expect them to come out with new terms on Monday to reflect the new European prices.

Urea markets that had dropped back slightly look like they are now firming again. All eyes are on the current Indian tender, the result of which will put a level in the market.

NPK prices will also firm, not only due to higher nitrogen prices but the increase in phosphate too. Phosphorus acid, used in DAP and TSP production, has increased in price and is forecast higher into Q4.

Please talk with your Frontier contact about P and K requirements, as well as the benefits of PK plus sulphur compounds.