Frontrunner - 29th February 2024

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WHEAT

• Higher wheat prices

So far, 2024 has proven to be disappointing for wheat prices. London wheat futures lost 20% of their value over the first seven weeks of the new year, but in week eight they managed to reverse the trend and for the first time this year closed higher on the week. There was little to be bullish about and the gains were more a desire for speculative traders to lock in profits as wheat futures bounced higher from their contract lows.

The UK feed wheat market faces the same issue it has all season - with prices too high to compete for export sales, leaving the prospect for a carry out of over three million tonnes. Excessive rainfall and extensive flooding leaves 2024 UK wheat production prospects compromised. A crop below 11 million tonnes is leaving a notable shortfall to meet consumption needs which will be just short of 15 million tonnes.

London futures offer a price carry from old crop May to new crop November of around £18/t but it remains to be seen whether this is sufficient to encourage the carry and reduce the pressure on UK old crop prices.

• Corn at multi year lows

World feed grain prices continue to fall and early this week Chicago Board of Trade (CBOT) corn dropped to its lowest since late 2020.

Speculative funds have built a record short position of over 340,000 contracts, driven by the weight of a 2023-24 world corn crop which the United States Department of Agriculture (USDA) sees jumping to 1.232 billion tonnes, 76 million tonnes up on the previous year.

Talk that China might have bought up to ten cargoes of Ukrainian corn triggered a price rally for CBOT corn futures on Monday, which helped wheat prices rise.

• Russian wheat even cheaper

The world wheat price rally proved to be short lived as Russian export sales prices fell sharply towards $200/t FOB. Jordan bought 60,000 tonnes at $240/t including all freight and costs – this is thought to be Russian origin at sales values without freight $205 - $210/t.

The pressure of the fiercely competitive world wheat export market took futures prices lower again midweek, despite a brighter picture for EU wheat exports. Meanwhile, official EU wheat export numbers continue to climb close towards last season's pace, suggesting the 32 million tonnes plus export estimates will be achievable and therefore not leave a heavy carry out. Shipments were 600,000 tonnes up on the week, reaching 20.497 million tonnes which compares to 21.26 million tonnes this time last year.

BARLEY

• Ample physical feed barley left but growers reluctant to sell

Last week there was active trading of new crop UK domestic feed barley and this gave support to new crop values, as growers were not sellers due to half term holidays and no progress having been made on spring sowings.

This gives modest support for the summer positions on old crop feed barley, but not the nearby positions where demand is poorer and farm sellers pop up as cash is needed to finance inputs.

• Malting barley sowings delayed in France and England

Many parts of the two major supply countries, France and England, will need ten to 14 days of dry weather to let the land dry out so planting can start.

Some of the light land may be able to be worked on sooner but not the bulk of it. If sowing does not take place until late March, then brewers and maltsters will get a little nervous. Some of these nerves will be soothed by the slower offtake of malt from the crop '23 harvest which compares to initial projections made 10 -12 months ago.

The cost of living pressures are bringing to bear reduced demand, with lower commodity prices yet to filter through to consumers. Lower prices will eventually trigger more robust demand, but until then we can expect to see high inventories of stocks, which ultimately will include feed and malting barley. We also have to see how later plantings might impact forward values.

OILSEED RAPE

• Markets trade lower as oversupply in rapeseed markets continues

European markets for protein are weak due to lower demand for the summer, which is not helping rapeseed crusher margins and therefore leading to lower prices paid for the seed. Cover feels comfortable amongst crushers which is also depressing prices.

According to FEDIOL, in January, the EU broke record levels of rapeseed crushing with 1.76 million tonnes being processed by its members. However, this was not enough to sustain any rallies in the market as a higher crush level is required to reduce the surplus we currently have.

Other oilseeds markets were also weaker on the week, with lack of demand in the forefront.

 FERTILISER

• Urea/AN

We experienced a much quieter week in the global urea market, with very little change in prices.

Egyptian urea values remain mostly unchanged after the slight drop last week. Once again, there's little impact to the prices in the UK market as very few vessels are arriving in the UK at this late stage in the season, other than to cover shorts.

The urea market in the UK remains undervalued in terms of replacement costs and it's also subdued due to weather. However, if there's a break in the wet weather we could see demand ramp up in a much smaller delivery window and with vessels due to arrive, it could put pressure onto logistics in getting this product delivered onto farm in time for spring applications.

Growers in England should be mindful of the upcoming urea stewardship scheme which is due to start on 1^st April 2024. For those who want to use untreated urea before the 31^st March deadline, bear in mind time is running out for product to arrive in the UK and be delivered onto farm and spread within regulations.

We recommend purchasing any of your further urea requirements with a urease inhibitor (such as Sustain), in the case that delivery and weather delays occur. This will allow you to stay compliant with the regulations.

Gas and ammonia prices remain low and it's unlikely we'll see an increase in values as the weather conditions look to improve as we head into March - although that's not a given. At present, European factories are still on reduced production and some are still curtailed due to lack of demand from farmgate.

If farmgate demand increases as we'd expect it to in the next few weeks, it's still not clear whether these factories will increase production. It appears that imported AN is unlikely to come to the UK in big volumes, as demand will also increase in Europe and most of these factories will keep production for their domestic market rather than ship into the UK, which is where prices remain restrained compared to the rest of Europe - increasing freight costs are also incurred to ship AN to the UK.

Nitram remains on offer for April and May delivery at competitive levels.

We could see supply of all urea, AN and NS grades tighten up as suppliers sell out of their stocks and not replace them this spring. Especially with the current lack of farmgate purchasing for the fear of holding higher priced stock as we get nearer to the normal 'new season' buying period around end of May/June.

• UAN/Liquid

Where growers have had the opportunity in catchy conditions to apply UAN in recent weeks, on farm storage tanks with capacity should be topped up promptly to ensure product is on farm and ready for the next round of applications.

This planning will help to avoid delivery pinch points in what could be a condensed spring season due to recent weather. This applies to N and NS grades, as well as those with a requirement for bulk NPK products.

UAN values remain unchanged in today's UK market and comparable to solid products available.

• PKs

There has been a decent number of enquiries and demand has picked up for P and K. MOP remains good value, which is at its lowest value for some time due to oversupply and lack of demand globally. TSP and DAP prices remain stable.

With the lack of farmgate demand, stocks of all P and K grades aren't plentiful due to suppliers being reluctant to overstock. Therefore, we could see periods where these P and K raw materials, as with nitrogen products, are limited in supply as we go into spring usage period.

Polysulphate ideally needs to be applied early March at the latest (weather dependant). If you've purchased straight nitrogen, please know this is a good source of sulphur for crops but it'll need to be on farm very soon.

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