Frontrunner - 30th June 2023

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WHEAT

• Volatile week for wheat futures

The week started with news that the Wagner Group's attempted coup against the Russian government had failed. In addition, Sterling has weakened against the Euro over the past week while it has strengthened against the US dollar.

As a result, London wheat futures opened the week with highs that were £5.05/t up on the day before closing up £0.25/t. MATIF wheat futures followed a similar pattern - up €7.25/t at the start of the day, closing up €0.25/t. Conversely, Chicago Board of Trade (CBOT) futures traded in a $0.34/t range during the day and closed at $0.06/t.

It's been a bullish month on the whole. London wheat futures were £180/t on the 31^st May 2023 and rallied through June to reach a high of £212.50/t yesterday, 29^th June. This is an increase of £32.50 over five weeks and the market awaits to see if values have now reached their peak.

On Tuesday 27^th June, London wheat futures closed £8.25/t down on the day and MATIF wheat futures €10.25 down on the day.

The selloff continued as London wheat futures closed a further £2.55/t down and MATIF wheat futures €5/t down on Wednesday. This brought MATIF futures close to their lowest point in three weeks. CBOT futures closed at around £11/t down last night, which is equivalent to around $0.40 a bushel.

The weather premium continues to shed with several key bearish points making the headlines this week.

• Discounted Russian wheat may not be sustainable

Russia continues to offer 12.5% wheat at $235/t FOB, which undercuts the EU market by £25-30/t. It remains to be seen whether this discount will be enough to encourage buyers to choose Russian wheat over wheat of German or French origin, considering the volatility present in Russia at this time.

The Black Sea grain corridor export deal is set to end in mid-July and it is anticipated that Russia will reject any further extension. While Russian wheat is currently selling at a discount, Russia is forecast to be 17% down on production this year, which may impact prices if yields drop, especially as quality issues are being reported. An increase in the cost of Russian-origin wheat would help alleviate some of the current pressures on offers from Northern Europe.

The United States Department of Agriculture (USDA) predicts an 85-million-tonne crop for Russia, while Russian estimates are lower at 78 million tonnes. As Russia's total carryover from the 2022-23 crop is uncertain, it is difficult for the market to estimate Russia's new season supply and demand requirements.

• Morocco to subsidise milling wheat imports

Morocco has confirmed it will subsidise imports in order to secure the 2.5 million tonnes of milling wheat it requires for July-September delivery. Moroccan millers are wary of purchasing Russian-origin wheat in light of the execution risks in doing so. To put this into perspective, Russian 12.5% wheat is currently priced equivalently to Romanian feed wheat – but Romanian wheat does not carry the same execution risk.

• Wheat production exceeds expectations

According to recent figures from StatsCan, the Canadian wheat crop is at a 22-year high at 26.9 million acres. Meanwhile, the Ukrainian Agrarian Association has reported it expects a 24-million-tonne crop – seven million tonnes higher than the 17-million-tonne government estimate.

Romania and Bulgaria are also forecasting better-than-average yields, predicting a three-million-tonne carryover between them.

The Ministry of Agriculture of the Russian Federation has claimed the country has almost drilled the 55.6 million hectares that were forecast but has also declined to update current crop estimates due to inclement weather across the country.

• Heavy stocks in Northern Europe add to pressure on wheat values

Cash premiums remain unchanged in Northern Europe and a combination of heavy stocks against limited storage space and generally strong yields is adding pressure on harvest wheat values due to fears values may follow barley trends.

Thursday saw reports that three cargoes of German 11.5% old crop traded to Morocco FOB at prices equal to Romanian wheat but at a cheaper freight cost. It's unknown how much cheap German wheat is available at this level. However, with cheap offers from Germany and Constanta/Varna/Burgas (CVB) currently available, Russian-origin wheat is becoming less appealing in light of its execution risk and freight spreads. Furthermore, there is some concern that soil moisture in Central Europe, Ukraine and Russia will damage spring crops.

BARLEY

• UK barley harvest begins

The UK feed barley harvest has begun this week although only limited volumes have been harvested so far. As a result, old crop demand is limited as many buyers await cheaper harvest barley supplies.

UK feed barley continues not to compete in the harvest period into Iberia and it feels like harvest feed barley could come under further pressure as more combines start to roll. The domestic market shows strong carries and farmers may look at their storage plans and consider changing the commodities they intend to store to maximise storage income.

• Strong malting barley markets

Malting barley markets have remained firm throughout Europe this week, although they have fallen from the highs seen last week. The concerns regarding the Scandinavian spring barley crop as a result of lack of rainfall persists, although it should be noted that this is being somewhat offset by French winter malting barley crops which are performing excellently with yields 10-20% above average and good malting quality.

• Reminder to sample your grain

As growers start to harvest, we remind everyone of the importance of accurate sampling this year to help maximise crop values and avoid potential issues. This will be especially important this year for barley crops to counter the wide range of drilling dates which could result in non-homogenous quality and to account for the likelihood of wheat admixture. For more information about sampling, please contact your local farm trader.

OILSEED RAPE

• Oilseeds markets buoyant

Since the start of June, global oilseeds markets have been buoyant with worries over the US soybean crop and expectations of increased biofuel mandates to be issued by the US Environmental Protection Agency (EPA).

In the last few weeks, markets have shed around half of what they gained during the previous market bull run as announcements around the US biofuel mandates fell short of expectations. This was particularly important for the market as there has recently been huge investment to increase the capacity for biofuel production in the US - to see mandates so low will be very disappointing for those who have bought into the industry. This news adds to the political movement in Europe which is looking to decrease vegetable oil content in biofuels with the intention of using more land area for food.

Weather remains a key driver, with drought in the US leading to soybean crop condition ratings at the worst levels seen at this point of the year for over ten years. Whilst rapeseed prices are always reactive to activity in other oilseeds and vegetable oils, at the time of writing things currently look comfortable for rapeseed supply going into the new crop year. There will be a large carryover of rapeseed in Europe and Australia which will be added to by strong new crop supplies. These are almost at the point of harvest in Europe and currently look positive in Canada and Australia, albeit at earlier growth stages. To add context, European rapeseed futures are carrying a significant discount to Canadian canola and US soybean futures (converted back to equivalent) which reflects the burdensome regional supply situation in this part of the world. Early French yields don't look fantastic by any means but generally the early yields never are; the trade will be keeping a close eye on European yields as progress advances to check that we will get the large crop most have been anticipating.

A large weather event or demand story is required to see prices return to some of the high values we have become accustomed to in recent times. 

 PULSES

• Old crop

The large increase in old crop demand seen last week has cooled to some degree but still remains substantial in some areas of the country, which is supporting the higher prices we have seen recently. The export market for old crop seems to have come to an end and demand is now looking towards the next crop year. Those who still need old crop for production will be fighting for a limited supply and will push prices higher, but this will be short-lived and prices are expected to fall significantly when harvest comes around.

• New crop

There has been quite a lot of volatility this week in the new crop bean market due in some degree to the events we have seen in Russia. With new crop prices closely related to feed wheat, prices have taken a substantial hit. We expect prices to remain volatile and subject to more change the closer we get to harvest when meaningful volume is traded. The weather has generally been positive for the crop and some more sun over the next couple of weeks could only improve things further. Yields are expected to be above average and harvest is likely to start at the end of August/early September.

 FERTILISER

• AN/urea

There is little or no change to report on solid nitrogen materials within the UK market following last week's urea increases. These most recent increases have appeared to reignite the appetite of UK nitrogen buyers, with increased enquiries for the Jan/Feb 2024 UK Ammonium Nitrate offer as well as for urea (protected and unprotected) for fixed autumn delivery months. Given that we have seen no change on nitrogen and sulphur market options this month while other nitrogen materials have increased, it is likely we will see some incremental moves up on nitrogen sulphur compounds in the weeks to come.

• UAN

Liquid buyers have had a good few weeks to consider the first offer from suppliers and levels remain unchanged for now. The early delivery offer for nitrogen sulphur compounds is likely to be withdrawn or offers may move upwards incrementally in the weeks ahead as a result of price changes for other nitrogen materials.

As expected, we have seen NP liquid offers enter the market for oilseed rape establishment this week and, for those growers with application capability, the cost per hectare of these offers is comparable to conventional oilseed rape starter fertilisers.

It is the last chance to secure foliar options to support milling wheat proteins, as applications have been ongoing this week and will continue into next week with suppliers reporting good demand from growers to support 2023 milling wheat crops. There are options still available for delivery next week - please speak to your Frontier contact for more information.

• NPKs/PKs

There is very little to report on PKs as the market has been seeing levels decline in relatively large increments. Interest is centred mainly around options for oilseed rape establishment, DAP, Oilseedstart and Physiostart, as these growers have finalised their cropping plans and are looking to secure their product for July delivery.

Although we are likely to continue to see PK values easing, including DAP, growers requiring product for oilseed rape establishment need to consider their order size and delivery timescale. Please speak to your Frontier contact for further advice.

Finally, a mention of Polysulphate. While this is a hybrid product of potassium, sulphur, calcium and magnesium, it typically follows the MOP market. However, the June/July delivery option is currently the bottom of the market – there should be small increases as we move towards autumn.

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.