Frontrunner- 30th July 2021

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WHEAT

• Final end-of-season push for UK wheat prices

Wheat long-holders in many areas can still achieve attractive premiums for old crop wheat as the market scrambles to find stocks to service late-season demand. In Scotland and the North of England particularly, wheat prices that are £30-40/t above harvest levels should encourage most sheds to be emptied as the country enters a new crop year with bare boards and minimal carryover. As wheat harvest started in the south this week, most merchants and consumers will breathe a sigh of relief as we come to the end of one of the smallest UK crop years in recent history.

• French imports are on their way

Growers are encouraged to take advantage of the attractive wheat prices before a fleet of cheap French import vessels hit our shores. Many merchants had cargoes bought for arrival in late July, but severe rain delays to the French harvest have pushed back loading dates leaving many high and dry. This means the window for any old crop premium depends heavily on French weather; but, with some vessels loaded and wheat harvest now around 30% complete, it feels like next week's market could be one to watch.

• Concerns persist for crop in the US and Canada

US markets were buoyed this week due to weather concerns and a disappointing start to the spring crop tour in which some yields were reportedly 40% below the 5-year average. This will have a serious impact on US end stocks and begs more questions of neighbouring Canada's crop potential following recent hot, dry weather. The market continues to watch out for more bullish flags but growers and merchants around the world also have one eye on demand. With export sales lagging around the world and no indication that China will step in to buy feed grains and oilseeds in the short term, questions will continue to be asked as to how big an impact smaller stocks will really have. 

BARLEY

• Strong progress on UK harvest

It has been the busiest week so far for the UK barley harvest. Winter barley harvest in the south is now nearing completion and the picture is of variable quality but fair yields. Harvesting across the midlands and further north has become a 'stop-start' affair as rain holds up progress in many areas. Demand for feed barley remains good as end users await the arrival of new crop wheat both imported and domestic. Until UK new crop wheat becomes available, barley usage in the rations will remain high. Some export opportunities for feed barley from southern UK ports still exists. These ports have a freight advantage over ports in the north where the domestic markets lead the way.

• Quality concerns for European malting barley

The malting barley market across Europe remains firm as poor weather interrupts harvest progress. The possibility of quality issues means sellers are reluctant to offer while the majority of the European spring barley crop is still in the field even with firming feed barley prices this week. Malting premiums are therefore holding up well for now. Both buyers and sellers await better weather and resumption of harvesting which should give the next indication of which way the market will go.

​OILSEED RAPE

• Flat prices in month of July

After a dip at the start of the month, UK rapeseed prices are going to finish within a few pounds of levels seen at the start of July and close to contract highs. External factors continue to take centre stage with the worsening crop situation in Canada being the main concern. Canadian canola crop estimates continue to plummet, with output now seen at below 15 million tonnes and no relief from the hot, dry weather predicted in recent forecasts. Widespread rain in the key Australian production regions is helping to maintain optimism for the country's crop, but these supplies will only come on stream from December onwards. With the Canadian crop in trouble, European crushers are keenly watching the progress of the rapeseed harvest progressing closer to home.

• European yields marked down

Unfortunately, EU rapeseed production numbers are being revised downwards following reports from Germany and Poland, in particular, as a result of the extreme heat and dryness in July. This week, Oil World reduced its German crop yields estimate by 2% from last month's figure and the European Commission has suggested that the Polish crop yield could be 11% down on 2020. Last month, it predicted a drop of only 7%. Problems are also evident in Spain, Italy and the Czech Republic although better crops in Bulgaria and Romania could marginally offset the losses elsewhere. EU rapeseed production is projected to reach 16.73 million tonnes, which would be 200,000 tonnes up on 2020. However, it is the lower opening stocks and developing horror story in Canada that is occupying traders' thoughts.

• Domestic harvest progressing

The UK harvest continues to progress, particularly in the south and southwest. Early yield reports are around 3.3t/ha and it appears that yields are improving as the harvest moves north. The early delivery premium which has been seen during the transition from old to new crop has now largely disappeared and is unlikely to reappear unless there is a deterioration in harvest weather conditions.

 FERTILISER

• Nitrogen/urea

Ammonium nitrate markets have been slow this week with domestic prices being withdrawn and reissued again at a £10/t increase for spot and September deliveries. This price change closes the gap slightly on higher European levels and reflects the production cost pressures as gas prices move towards £1.00 per therm into Q4 from 15p per therm in August last year.

The UK currently has very low gas stocks – approximately only 25% of capacity - with increased demand due to low wind output and reductions in supply from Norway.

With firm production costs due to gas prices and the UK not yet hitting its demand winter periods, it's still advised that growers look at requirements for a September delivery.

Growers should also ensure they have cover for first applications due to the current logistics situation, which is unlikely to improve as we move into spring 2022.

India has confirmed its tender for 1.2 million tonnes of urea with a reported 700,000 tonnes coming from China. This is a shock to the market given China's high production costs and could be a sign of a potential dip in global markets. There have also been reports of urea prices dropping by $10/t in other regions, including South America. However, shipping freight rates continue to hold firm and fluctuations are to be expected which could affect the markets by around $10/t in either direction.

Tight global stocks of urea coupled with production downtime could still hold the market at these levels with more international buying due soon.

• PKs

After the recent rally, phosphate prices are stable and holding. Prices in the UK are just under replacement levels.

As reported last week, it's now potash that's on the move up, following other commodities as demand into South America improves, holding up European prices. MOP is just under £400/t with another increase in excess of £10/t expected on new cargoes into the UK for late August and early September.

Planning your phosphorous and potassium requirements now is advised. Your Frontier contact is available to discuss the new grades.

Get in touch

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