Frontrunner - 2nd December 2022

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WHEAT

• Lower demand from China

US Chicago Board of Trade (CBOT) wheat futures have fallen to three-month lows and are now trading at levels last seen before the start of the Ukraine-Russia conflict.

Traders are focused on the situation in China, where strict Covid-19 lockdowns are expected to result in reduced demand and lower-than-expected import requirements. China is one of the world's largest wheat importers and the United States Department of Agriculture (USDA) estimates its import need this season to be at 9.5 million tonnes - slightly down on last season. This, coupled with the extension of the Black Sea export corridor agreement and further cheap export sales from Russia, means prices are currently being influenced by bearish trends.

International wheat trade has been active this week with the major importers Egypt, Algeria and Pakistan all making notable purchases, which collectively amount to around 1.5 million tonnes. Russian wheat is the most likely option with values before freight at around $317/t (approx. £265/t) for 12.5% protein milling quality. It is believed that Turkey will purchase its wheat from Ukraine.

• EU maintains export market share

According to official data, EU weekly wheat exports have shipped a further 267,000 tonnes which brings the total export volume to date to 13.9 million tonnes. However, private estimates are around 1.9 million tonnes higher, which leaves the unofficial total at 15.8 million tonnes.

With seven months of the season remaining, EU export shipments are halfway to the 31.6-million-tonne export total estimated for this season by analyst group, Stratégie Grains. With a purchase volume of 1.97 million tonnes, Algeria is the leading buyer of EU wheat followed by Morocco, (1.86 million tonnes) and Egypt (1.5 million tonnes).

Meanwhile, US weekly wheat export sales are slow with just 155,500 tonnes exported of the 300,000-625,000 tonnes that traders had expected to be sold at this stage. This season's US export pace is 2% behind what is needed to meet the USDA export estimate and is progressing slower than any season for the past five years. Mexico is the primary US wheat buyer followed by the Philippines and Japan.

• Concerns for US and Russian 2023 wheat

The condition of the US winter wheat crop remains a concern although there has been an improvement over the past few weeks. The crop is now seen at 34% rated 'good/excellent' which is up two points on the week, as cited in the last national report that will be published until the spring. At this time last season, crop ratings were higher with winter wheat at 44% rated 'good/excellent'. The five-year average is higher still at 49%.

Heading into winter, 75% of the US winter wheat area is in drought, which means winter precipitation is essential. Kansas, the primary winter wheat producing state, is seeing 43% of its crop rated 'poor/very poor'.

Eastern Ukraine and central southern Russia have no snow cover and temperatures are forecast to drop as low as -20°c. Late drilled crops could see damage if the temperatures drop this low before snow arrives.

BARLEY

• Malting barley prices under pressure

It has been a quiet week in the feed barley market. Feed barley has been seen trading in the forward positions, mainly as a result of merchants covering in their short positions. Compounders have been generally absent, waiting for consumer interest before pricing further.

UK malting barley prices have come under pressure this week, with little domestic and export demand. With the size of the exportable surplus and slow export pace, it can be speculated that premiums may come under further pressure post-Christmas.

• Manage your risk with Frontier

Looking forward to the 2023 crop, Frontier offers a range of options to help growers manage risk and market their malting barley crops. Guaranteed minimum premium contracts, futures related distilling contracts and malting barley pools are just a selection of the contracts that are available. Please speak to your local farm trader for more information.

OILSEED RAPE

• Potential for increased demand from China

This week saw a halt in the decline of oilseeds values, which is the result of several factors. Weather in Argentina has remained dry, which has cast doubt on the establishment and progress of its soybean plantings, while in the other main soybean region, Brazil, weather has been favourable so far.

Oil and oilseeds markets saw some strength this week on the back of the anti-Covid protests in China, which has given the market confidence that the Chinese government may reduce some of its Covid restrictions. However, this is yet to be confirmed.

If restrictions are partially or entirely lifted, it would likely generate a strong rebound in oilseeds markets as there would be a subsequent increase in demand from China. Chinese demand has been reduced since the onset of the pandemic.

• Exchange rates impact ex farm values

This week, sterling has strengthened against the euro as global investor confidence grows. Since the 10^th November, a stronger sterling has reduced UK ex farm values by around £15/t.

• Season's figures show record rapeseed crop

Generally, fundamentals in the rapeseed world remain bearish with a record global crop almost confirmed. Final figures will be drawn when Statistics Canada releases its Canadian canola figure later today and once Australia's harvest is concluded and volumes totalled.

In combination with this season's record crop volume, it is also likely to be a year of record demand with processors in the EU already showing preference for rapeseed, which is currently cheaper than alternatives such as soybeans.

• Setting the stage for new crop

Looking forward to new crop, it is likely there will be a substantial carryover of rapeseed from this crop year. This is due to the volumes of rapeseed produced this season – around 74 million tonnes globally. This is coupled with an increase in the planted area both in the UK and EU, which will lead to a heavy supply situation in the first half of 2023 before supply from other parts of the world hits the market.

 FERTILISER

• AN/urea

The ammonium nitrate and urea markets remain quiet following changes to UK levels in early November. It appears that there are UK farm buyers who still have requirements, but it seems they are holding out until they have further crop confidence before committing to final input purchases.

There is tightness of supply as we enter the new year coupled with a smaller haulier network that is able to move hazardous products. For these reasons, we advise growers to ensure they have product on farm for early spring applications.

As expected, UK and European gas demand has increased following the recent drop in temperature. This has caused gas values to increase by 20-25% in the last month as a result of increased demand. This is likely to impact the cost of ammonium nitrate products as manufacturers will be hit with higher gas costs for production.

Over the past two springs some sulphur products have experienced pinch points in availability, including Polysulphate. As spring applications are likely to be made early next year and delivery dates are limited, we advise growers to book their requirements early.

• Liquid

There has been little trade on nitrogen sulphur liquids although prices continue to be competitive against solid alternatives for those that are still to secure spring volumes. The liquid market holds around a 22% share of the UK nitrogen market and is continuing to see an uptake in new liquid users installing their liquid tanks for crop 2023 and crop 2024.

• PKs/NPKs

Enquiries on phosphorous and potassium (PK) products continue to increase as soil sample results and fertiliser plans are completed for autumn planted crops. The importance of adequate phosphorous and potassium is emphasised further following two seasons of low purchase/usage and an above average yield for 2022.

If your PK applications are going to be made in advance of your nitrogen applications, then we advise to form those fertiliser plans now and begin your enquiries for product availability and delivery for December and January.

Get in touch

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.