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World wheat markets continued to rise this week, driven higher by heightened tensions between Ukraine and Russia. Threats to the longevity of the safe Black Sea export corridor amidst the increasingly aggressive rhetoric from the Kremlin has encouraged further short covering and speculative buying of wheat futures. Over 210 vessels carrying agricultural produce have now left Ukrainian Black Sea ports since the UN-brokered deal was signed with Russia, but there is increasing doubt the deal will extend beyond the expiry of the initial agreement in November.
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WHEAT
WHEAT
- Higher wheat prices
World wheat markets continued to rise this week, driven higher by heightened tensions between Ukraine and Russia. Threats to the longevity of the safe Black Sea export corridor amidst the increasingly aggressive rhetoric from the Kremlin has encouraged further short covering and speculative buying of wheat futures. Over 210 vessels carrying agricultural produce have now left Ukrainian Black Sea ports since the UN-brokered deal was signed with Russia, but there is increasing doubt the deal will extend beyond the expiry of the initial agreement in November.
UK prices were also sharply higher. May 2023 London wheat futures traded back up to £300/t for the first time since 20th June due to a sharp decline in the value of sterling in foreign exchange markets. The Conservative government's mini budget last Friday shocked financial markets and sent the sterling into a freefall; it dropped as much as 6% against the euro before the Bank of England provided some element of intervention and support.
Looking ahead, persistent rain is delaying the planting of the 2023 Russian winter wheat crop which could result in a lower planted area. The pace is at a nine-year low and more rain is in the forecast. Putin said farmers are amongst those drafted into the Russian military this week which added a further challenge.
- Deteriorating crop prospects in Argentina
This week, the Buenos Aries Grains Exchange (BAGE) made its first 2022-23 wheat and corn production estimates amidst a prolonged period of drought. Wheat is expected to fall to just 17.5 million tonnes, which is below the United States Department of Agriculture's (USDA) estimate of 19 million tonnes in its September World Agricultural Supply and Demands Estimates report (WASDE). Corn estimates from BAGE are further adrift from the USDA, down at 50 million tonnes which compares to the 55 million tonne figure in the September WASDE report. Last season, Argentina produced a record wheat crop of 22 million tonnes and it provided sufficient volumes to export 16.5 million tonnes of wheat, which coincidently is the 2022-23 wheat production estimate from the Rosario Grains Exchange. Over 50% of the wheat area is suffering from drought with no meaningful rain in the forecast.
- EU export pace still strong
EU wheat prices have enjoyed the benefit of a weak euro that touched its lowest point when compared with the US dollar since June 2002, and Paris wheat futures touched their highest level since last June. Euro weakness has helped EU wheat aggressively compete in export markets and official shipments have reached 8.8 million tonnes. However, the vessel count for each EU exporting country takes the total to 9.67 million tonnes, which is a third of the EU wheat surplus shipped with less than 25% of the season gone. Latest Russian wheat export estimates suggest an increasing pace, with September estimates at 4.3 million tonnes - 800,000 up on August figures.
BARLEY
- Feed barley
This week, feed barley struggled to keep pace as wheat prices firmed and as a result, the discount between feed wheat and barley has widened. The weaker sterling has meant that UK feed barley exports are now competitive into Iberian demand.
- Malting barley
Malting barley premiums have come under further pressure this week and are squeezed by the firming feed barley prices. UK domestic buyers appear well covered, with any buying interest limited to the New Year.
The weaker sterling has supported export malting barley prices and narrowed the spread between UK domestic and UK export values. UK malting barley continues to attract a premium to Scandinavian barley due to its higher nitrogen content, but the UK's surplus of malting barley continues to look weighty.
OILSEED RAPE
- Global oilseeds markets continue to fall
In recent weeks, global oilseeds markets have continued to slide with concerns currently around demand rather than supply. The rapeseed market is dealing with a bumper global crop of around 73.5 million tonnes, which is likely to exceed any rise in demand as there's no extra demand from China or from European biofuel manufacturers.
Despite this large production estimate, there has been speculation of a reduction in Canadian yields this week, which has given rapeseed prices some short-term strength. The market will be keenly watching for some confirmation of Canada's production figures, although the final results will be unlikely to cause any shortages in supply.
- U.S soybean harvest switches to South American production
Outside of rapeseed, the focus for the next cycle of soybeans now switches from the U.S harvest to South American production, where crops are not yet fully planted and weather conditions remain benign. Any changes to current weather patterns will potentially support the oilseeds markets.
In the background of all oilseeds markets, the demand of the biggest global importer, China, remains unknown and there are concerns around the possibility of widespread lockdowns again this winter, which could impact China's demand for soybeans and other oilseeds as its consumer demand falls.
PULSES
PULSES
- Bean values no longer follow London wheat futures
In the turbulent market, bean values have finally seemed to pull away from following London wheat futures. The market is at last realising that with lack of buying interest for human consumption beans, the feed bean heap in the UK gets bigger. Some consumers did buy feed beans at the beginning of the week when the Stirling fell dramatically against the dollar, but it was not sufficient new demand to keep beans values from falling relative to wheat. There is still a lack of vessels taking the surplus away in nearby positions, so further falls in spot values are expected as growers look to sell in the traditional pre-Christmas period.
FERTILISER
- Urea/AN
There has been fluctuations in prices, particularly for urea in the last seven days. This is mainly due to the exchange rate, with the sterling weakened against the dollar. The sterling dropped to $1.04 at its lowest level recently but is slowly recovering and is at $1.12 at time of writing. Despite this, urea/treated urea grades still remain the best buy for nitrogen sources and offer later delivery months. The previous Indian tender was expected at 1.2 million tonnes and fell short at 874,000 tonnes. A further tender for 2.5 million tonnes is imminent and is in conjunction with continued demand from other parts of the world which maintains the pricing levels on farm.
The UK market has seen limited volumes of granular ammonium nitrate (AN) become available creating an interest in buying activity and imported AN is still an option for growers. Please speak to your Frontier representative for advice and information.
- UAN
As cereal drilling continues or is imminent across the UK, growers with certainty around their crops and those that have additional requirements for the season, took the opportunity this week to book tonnes against the latest offers available from UAN suppliers. These more recent offers were at a marked increase on the initial values seen over the summer, and available nitrogen and nitrogen sulphur tonnages were limited. Terms are expected to be withdrawn with a POA position in place as October arrives.
- Phosphate/potash
As with nitrogen, the exchange rate also affects the phosphate and potash market. Therefore, the drop in the sterling supports current pricing levels and prices remain stable. The demand, however, remains steady as growers begin or continue to drill, and wait on some certainty that the crops look healthy on emergence before they commit to purchasing inputs.
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.