Frontrunner - 27th October 2023

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WHEAT

• Wheat prices fall as export interest fades

European wheat futures prices were notably lower this week with little fresh trade news to enthuse buying.

Amid strong Black Sea competition, the disappointing EU wheat export pace is behind last season and is leading to concerns that a burdensome carry out will come into fruition.

Whilst analysts say there haven't yet been any Chinese vessels to collect recently bought French wheat for the week ending 22^nd October, the EU still managed to ship 520,000 of wheat.

Cumulative shipments have reached 9.334 million tonnes which compares to the 11.984 million tonnes shipped this time last year - although data is not complete. On the face of it these figures seem bearish, however, Stratégie Grain's export estimate for the season sits at 30.9 million tonnes (comparable to last season's estimation of 32.3 million tonnes) and that is with year ending stocks 800,000 tonnes lower than last year. The balance to ship is on that basis is 21.57 million tonnes.

The weekly pace needs to be somewhere in the region of 600,000 tonnes per week for the rest of the season to hit target, but that could be less once the scope of incomplete data is established. This suggests the current export pace is not as much of an issue as some might suggest.

So far, Romania is the top exporting EU country with 2.571 million tonnes shipped, while France is second with 1.827 million tonnes. Morocco remains the primary destination and has received 1.53 million tonnes of EU wheat so far. China doesn't feature on the destination leaderboard yet.

Wheat imports are still at a strong pace of 292,000 tonnes for this week, taking the cumulative total to 2.716 million tonnes. Ukraine accounts for over half of wheat imports and the UK is unsurprisingly not on the leaderboard.

• Black Sea supply boost
  
  

This week, Black Sea suppliers have seen a boost to their grain supplies. The Russian Ministry of Agriculture upped the country's wheat crop estimates to 93 million tonnes which is slightly ahead of other recent estimates - the lowest of those being 91.4 million tonnes. The Ministry of Agriculture's previous estimate had been somewhat behind the curve at 77 million tonnes.

The United States Department of Agriculture (USDA) attaché in Ukraine now sees the country's corn crop reaching 30.7 million tonnes, which is up from 27 million tonnes last season and above the October World Agricultural Supply and Demand Estimates (WASDE) of 28 million tonnes.

This contrasts with consultancy APK Inform, which said the Ukrainian corn crop will be 24.8 million tonnes down from 25.6 million tonnes estimated last month. The consultancy also sees the wheat crop at 21.5 million tonnes with wheat exports reaching 13 million tonnes, despite the USDA only seeing 11 million tonnes being shipped.

An increased number of vessels are heading for Ukraine's own Black Sea export corridor. 17 vessels are waiting to load and the Ukrainian deputy Agricultural Minister said one million tonnes of grain could be shipped using this initiative in October. However, futures prices rallied early on Thursday due to the news of a temporary suspension of vessel traffic to and from the ports in this corridor because of concerns around Russian attacks.

Meanwhile, farmers in Ukraine power ahead with winter drilling. Ukraine's Agricultural Minister said that around five million hectares of winter crops are now planted, of which 3.46 million hectares is wheat. An estimated 4.4 million hectares of winter wheat is expected in total, although weather and costs might cause this to be lower.

• UK market struggles

Domestic feed wheat destinations for pre-Christmas delivery are becoming scarce. Whilst there is more business to be agreed throughout January and onwards, the nearby markets appear full of farm, co-op and merchant feed wheat supplies. Even the recent pull to the biofuel sector has slowed due to plant issues and heavy wheat cover.

Export demand remains flat with ample supplies of North European feed grains and Black Sea supply filling Irish and Iberian mills and ports. Estimates suggest only around 100,000 tonnes of UK wheat from a likely surplus of about one million tonnes have been shipped.

Widespread significant rainfall across the country has brought a halt to winter wheat drilling, leaving waterlogged fields and flooding in many regions. With over a quarter of the expected UK winter wheat area still to plant and without a prolonged dry period forecast, this brings into question the size of the potential 2024 wheat crop.

BARLEY

• Feed barley

This week, feed barley values have remained relatively unchanged despite a drop in wheat values.

Export demand remains almost totally muted at the moment, with the UK too expensive in comparison toother origins to pick up business into continental Europe.

Exports have made a relatively slow start compared with last year, but that number should start to increase with malting barley export programmes kicking off in recent weeks.

Domestically, barley's discount to wheat has widened in the last ten days to more than £20/t. This comes as a result of strong wheat pricing in the north of the UK combined with the potential of a smaller UK wheat crop. Barley should look more attractive to the animal feed compounders because of this, which could stimulate some demand for feed barley in the new year where compounders still have cover to take.

With the lack of export demand in the spot position, we are seeing barley from the South start to price into the North and the northwest regions rather than southern ports - November is often a month famers have sold forward into.

• Malting barley

Malting barley prices have risen on the week, with buyers running into a lack of selling interest from both the trade and farmers.

Farmers have, however, taken advantage of strong premiums, particularly with the weakness in feed grains from harvest until October and as a result are well sold.

The short-term focus will be on executing contracts for October to December, which is traditionally a busy period for movement.

• New crop barley

September and October saw many growers get ahead with winter drilling, but the picture has somewhat changed following the arrival of Storm Babet. The impact of the severe rainfall and subsequent flooding in many areas has stalled any further winter cereal plantings in the UK.

With more unsettled weather forecast, drilling progress will remain a key discussion point as we move into November and it could be that some growers opt for spring cropping instead. In such a scenario, Frontier has a range of contract options and opportunities available. You can learn more by speaking to your local farm trader or agronomist. 

OILSEED RAPE

• Return to volatility for rapeseed

At the time of writing, rapeseed prices are at the same value they were at the start of the week, though they've been through a turbulent time to get there after falling £15/t mid-week.

As the week began, rapeseed prices continued their decline which was fuelled by the heavy supply situation and lack of positive input from other oilseeds markets.

This trajectory soon changed when news broke that Ukraine would be shutting its export corridor due to Russian mines entering the area. This corridor had been successfully allowing grain vessels to navigate out of the Black Sea and at heavy price discounts due to the risks involved in buying this origin of material.

This news initiated a €10 price gain in the MATIF futures market on Thursday. By the end of the day, Ukrainian officials refuted the closure of the corridor and the market returned back to unchanged on the day, which shows how nervous these markets still are around the Ukrainian supply situation.

Demand for rapeseed and its products remains high due to its price competitiveness, but the huge supply surplus the world has is expected to halt any substantial gains in the foreseeable future.

• Soybean markets

Outside of rapeseed, the market keenly awaits a development around the dry weather conditions in Brazil where growers are attempting soybean plantings. Some rain has been seen in the north of the country, but not in the crucial growing area of Mato Grosso.

This week, we learnt that China signed a US agriculture purchase agreement for billions of dollars' worth of agricultural produce. Included in that was large quantities of soybeans; though interestingly this had little positive effect on the market as traders wait to see the full detail.

Crude oil has struggled to sustain prices above $90 per barrel, although the conflict in the Middle East could easily spur some more gains here and help to pass strength through to vegetable oil prices and therefore oilseeds. 

 FERTILISER

• Urea/AN

News out of India this week has indicated written offers of four million tonnes but physical availability is still tight partly due to Chinese producers withholding stock.

North African manufacturers have largely refrained from offering to the Indian Potash Company (IPL) due to better liquidity in Western markets. At the time of writing, IPL has secured 1.67 million tonnes, with India making clear its intentions of covering a larger tonnage prior to December.

In other news, global ammonia prices have increased yet again. This is adding to cost pressures for ammonium nitrate (AN) production, especially in Europe where seasonal gas values are creeping upwards.

Domestically, CF Fertilisers has re-entered the UK market for March deliveries and is offering competitive pricing in what is going to be an extremely tight market for AN supply as we head towards spring 2024.

Frontier offers a wide range of AN and urea based products and it's important to remember that 2024 sees the introduction of new rules around the application of urea and urea ammonium nitrate (UAN) products.

If these products are applied in England after 1^st April you will be required to use an inhibitor-based product, such as Sustain or Limus Perform. You can speak to your Frontier contact for more information, technical advice and guidance on how to plan your purchases accordingly.

• Liquid/UAN

With increased ammonia costs, we expect liquid UAN values to increase for spring delivery come 1^st November.

With a large percentage of the market still to cover, there is an opportunity to purchase product at competitive levels before price rises come into force early next week.

An important thing to consider is that with the current weather affecting crops and some acres possibly being replaced with spring cropping, it is of the utmost importance that you order accurately and only book the tonnes required.

• PKS

Potash pricing levels remain stable to firm due to lack of supply. Demand for potash has been lower over the summer and early autumn period but signs of an upturn in ordering are starting to show now that crops are developing.

Phosphates and diammonium phosphates (DAP) are very firm with pricing for this autumn and the first quarter of 2024. This shows that a larger-than-anticipated price increase is to come, which will be reflected in new nitrogen, phosphorus and potassium (NPK) terms due to come out soon.

Slower shipping from North African and Middle Eastern regions is also adding to supply issues. Given that the market in the UK and Europe is 20% behind year on year and that supply will become tight over the next few months, we strongly urge you to discuss requirements for this season.

Please speak to your local Frontier contact or email us at This email address is being protected from spambots. You need JavaScript enabled to view it. for more information or advice related to any of the topics and services mentioned in this report.