Frontrunner - 29th October 2021

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WHEAT

• Wheat futures hit new contract highs

Wheat futures prices soared again this week, striking new contract highs. This is another record on the back of multi-year highs, driven currently by strong export demand and concerns for tightening world supplies. The Paris wheat market reached its highest level since March 2008 following the release of the EU weekly export data which shows exports have now reached 8.99 million tonnes. Official data for France dating back to July remains incomplete showing just 753,000 tonnes shipped. However, unofficial vessel counts suggest that almost 2.6 million tonnes have been loaded, which would take the total EU shipments to an unsustainable 11 million tonnes.

US spring milling wheat futures hit their highest level since June 2011 this week, reflecting continued short covering for the depleted stocks of high-quality breadmaking wheat following the disastrous northern US and Canadian spring wheat crops. In October, the United States Department of Agriculture (USDA) cut its Canadian wheat crop estimate down to 21 million tonnes; this is 40% down on the year and private estimates are even lower.

• Russia cuts grain crop estimates

This week, the Russian Ministry of Agriculture cut the country's official 2021 grain crop estimate which, after drying and cleaning, is now placed at 123 million tonnes. This compares to its previous estimate of 127.4 million tonnes. The production losses are primarily due to the impact of hot dry weather harming the yield potential for spring crops. There was no wheat specific number quoted in the revised grain number, but the original estimate was 81 million tonnes. The USDA estimates that the Russian wheat crop is as low as 72.5 million tonnes, but private analysts are slightly more optimistic, reporting estimates between 75-75.6 million tonnes.

Markets have found additional strength this week as a result of uncertainty for Russia's 2022 winter grain crop potential. The Russian Ministry of Agriculture had said that farmers would drill 19.5 million hectares this autumn, but prolonged dry weather has resulted in delays and just 17.6 million hectares is planted so far. This compares to the 18.3 million hectares that were planted at the same time last year. Winter drilling accounts for 70% of the Russian wheat area but many regions are reported to have received less than half the average rainfall. Ukraine is also suffering from low soil moisture, raising concerns for the country's winter drilling potential. French winter wheat drilling advanced 21 points on the week and is now 61% complete with plenty of rain due in the coming days.

• Egypt back in the market

This week, Egypt, in what may have seemed an attempt to calm markets, has said it has strategic wheat reserves sufficient to fulfil domestic demand for six months. The General Authority for Supply Commodities (GASC) then promptly issued a fresh tender to buy wheat for December arrival. Despite export taxes, Russia proved competitive and secured sales for half of the 360,000 tonnes sold. Ukraine sold two cargos and Romania sold one 60,000-tonne cargo, signalling a tighter EU balance sheet and less of a need to offer competitive prices. Major importer Saudi Arabia tenders this week for a further 655,000 tonnes and, highlighting further North African wheat import needs, Morocco has cancelled its soft wheat import duty. 

BARLEY

• Logistical challenges in the barley market

This week has been relatively quiet in the UK barley market. Demand pre-Christmas is generally from trade shorts, with compounders well covered. Good carries are available into the new year and it seems compounders have relatively little cover on the books going into the spring.

On paper, UK feed barley is competitive; however, fixing sea freight remains very difficult. Road freight logistical challenges continue in all areas with an impact for all involved in the supply chain.

UK malting barley prices have fallen slightly this week, although malting premiums remain at very attractive levels. UK malting barley remains the cheapest origin in Europe although road and sea logistics are limiting fresh export sales being made. Looking forward to Crop 2022, there is strong demand for all grades of malting barley at historically attractive levels.

​OILSEED RAPE

• Extreme volatility remains in oilseeds markets

Energy and oil prices continue to drive markets this week as they continuously push record highs, creating better margins for rapeseed crushers. Although the market is volatile, it has found some support. Last week, February MATIF rapeseed futures rose by €17/t. This converts to around £12/t in UK ex farm values, slightly hampered by a strengthening sterling.

Canadian canola and Malaysian palm oils are following the same positive trend as EU rapeseed, aided by strong vegetable oil prices. However, US soybeans have traded relatively evenly this week as a result of slow Chinese buying.

The current market situation suggests that EU/UK crushers may not be able to crush as much seed as anticipated at the start of the season, which is coupled with the continued impact of Covid-19. There is a risk of falling demand should global lockdowns be reintroduced. All in all, the current outlook for the rapeseed market is extremely complex.

 PULSES

• Bean values stall

Despite sharp increases in wheat and corn values last week, bean values are not following the trend. There is a growing realisation that with such a large UK crop - over 700,000 tonnes - and limited exports so far this year, it's hard to see substantial further rises in the market.

Domestically, demand is flat. Most compound buyers have covered their winter requirements and the extruding businesses are finding it difficult to sell their product, which is made of 50pct beans and 50pct of very expensive rapeseed. Growers are now beginning to get their beans dry and ready to sell, putting further pressure on nearby values. 

 FERTILISER

• Urea/AN

Freight costs have risen for a seventh consecutive week after hitting a low at the end of April and look set to continue rising further next week. With Indian demand still to come and restrictions on exports from China, further price increases in the urea market are expected.

Whilst the price of imported ammonium nitrate has not changed in the last seven days, supply remains tight and isn't sufficient to meet market requirements.

• UAN

Limited volumes of UAN are now available across the UK, although some grades remain unavailable. Further tonnage is expected to be released into the market with a very cautious pricing approach and product is likely to remain in place from UK distributors.

UK growers are urged to assess their cropped area to ensure they have enough UAN covered to fulfil their season requirements. Spring logistics, product availability and farm delivery planning will be the key focus areas as we head into the new year.

• PKs

MOP and TSP prices have remained static in the last 7-10 days; however, MOP is expected to increase in price between November and January. The demand for MOP in Brazil is driving the global price upwards which will filter through into the UK market.

It is recommended that all growers check and ensure their soil indices, including pH, are at optimum levels for their cropping. Granular lime is an ideal product to rapidly correct pH and maximise the uptake of all nutrients, including nitrogen.

The supply of nitrogen sulphur products is tightening, so it is worth considering polysulphate-based products this spring for sulphur applications.

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