Frontrunner - 3rd April 2020

COVID-19

We're working hard to ensure we comply with all Government guidance and continue to deliver good service to our customers. This week we published three updates on our website to provide information related to Covid-19 for customers and suppliers.

• Social distancing and customer service

We have implemented measures in response to coronavirus to ensure we keep everyone safe whilst also supporting our customers' vital role in the food supply chain. Our actions include a range of measures across grain trading, agronomy, crop production and logistics to protect everyone's safety and safeguard business continuity. This update outlines some of our actions to demonstrate how we're acting responsibly but still with our customers' interests in mind. Read more…

• Additional information on payments, invoicing and administration

To ensure we comply with social distancing measures, we have moved the vast majority of our customer finance and administration team to home working. We've also put in place systems and procedures to ensure we are able to continue to manage customers' accounts efficiently. Read more…

• Information for third party hauliers

We are complying with all Government guidelines and in order that we can maintain a consistent approach, all our professional suppliers of haulage services have been sent and asked to comply with this health and safety guidance document.

WHEAT

• Wheat prices fall

A slump for world wheat prices and a near 3% appreciation in the value of sterling versus the euro pushed UK wheat futures £8/t lower this week before showing some degree of recovery on Friday. The spike in consumer buying in response to shopper panic-buying during the previous two weeks has all but evaporated. It is likely buyers will now adopt a more measured approach and there are concerns that a loss of the pub, restaurant and hospitality trade will see overall demand levels decrease. However, despite widespread spring drilling in recent days, few expect the UK 2020 wheat crop to exceed ten million tonnes, which will leave consumers dependent on significant imports to meet their total needs.

• Bearish data from the USDA

The United States Department of Agriculture (USDA) published its Prospective Plantings report this week which highlights the area size of crops US farmers are expected to plant for the 2020/21 season. Wheat, in isolation, was bullish this week. The overall wheat area was seen to drop to 44.655 million acres – the lowest on record from the USDA.However, it is a very different looking picture for corn (maize).

Last year, US farmers only planted a total of 89.7 million acres of corn due to prolonged heavy rain during the spring. Most analysts predicted the areas would bounce back to over 94 million acres this spring, but the USDA surprised the market with its farmer survey, which shows it expects to plant almost 97 million acres. This would be the highest acreage since 2012. Whether or not US farmers do this remains to be seen.

In other news, the recent collapse in ethanol prices and fall in corn prices have made soybeans a more profitable crop. Many US famers may switch to soybeans instead of corn.

• Russia releases strategic reserves

Russia has seen flour prices soar to record levels recently. To help ease concerns over supplies during the coronavirus pandemic, it will make state wheat reserves available. The Ministry of Agriculture of the Russian Federation holds 1.8 million tonnes of wheat and said it would sell up to 83% of this stock to the country's milling industry.

Yesterday, the Russian government officially approved the ministry proposal made last week to limit grain exports to seven million tonnes during April, May and June. This is broadly what was expected to be shipped without the quota in place. This leaves the ministry on bare boards, but many analysts have suggested that, following ideal autumn drilling conditions, Russia might harvest a near-record 2020 wheat crop of between 80 and 84 million tonnes. Crop ratings support this view with 94.5% of the crops rated 'satisfactory' to 'good' which is above the long-term average. However, there are increasing concerns for dry soils across the Black Sea region and little rain in the forecast.

• French wheat crop ratings slip

French winter wheat crop ratings dropped one point this week to 62% or from 'excellent' to 'good'. Although there are no strong concerns at this stage, this is far behind last year's 85% and the average of 87%. These figures are something to watch.

BARLEY

• ​The UK awaits a good rainfall

Good drilling progress has been made in all parts of the UK this week, with farmers taking advantage of the dry weather. However, many growers on heavier land have expressed concern that spring barley is being sown in less than ideal conditions and into poor seedbeds. Many seeds are lacking good seed-to-soil contact. It will be imperative that such crops receive a good rain shortly. As a result, there is a degree of nervousness in the barley market as it tries to anticipate both yields and the quality of this season's output.

• Pressure on the old crop feed barley market due to Covid-19

The malting barley market remains lifeless due to the Covid-19 situation. Now a lack of bottles and cans is making it difficult for many brewers to switch their production from kegs into formats that can be consumed at home. As a result of falling malt offtake, many UK maltsters are now selling back malting barley contracts which is putting further pressure on the old crop feed barley market. There still remains plenty of uncertainty on how the situation will impact the distilling market, with pressure now coming from some trade unions to urge distilleries to stop production altogether.

• Black Sea forecast

Black Sea dry weather continues to be the major event for the whole grains complex to watch for, including barley. It is already seen as a significant concern to many. It looks set to remain warm and dry for the foreseeable future and April will be a critical month. Limited rainfall in April is likely to extend export constraints and would be bullish to the whole grains complex. 

​OILSEED RAPE

• Stable prices

There has been plenty of activity in oilseeds markets this week, but physical UK prices remain largely unchanged. Currency exchange rates have been reasonably stable whilst the effects of downward revisions in the South American soybean crop have been counter-balanced by a drop-off in domestic demand.

Earlier in the week, the market digested the first Spring Planting Intentions survey from the USDA, but it was fairly out of date by the time it was published. It pointed towards a large acreage of corn plantings, but the survey work predated the collapse in crude oil prices and the subsequent impact this had on ethanol markets. Traders expect US farmers to be switching their intentions out of corn and into beans over the coming weeks.

• Surge in crude oil prices

On Wednesday, President Trump tweeted to say that he expected a deal between Russia and Saudi Arabia to cut oil production, resulting in a surge in Brent crude prices to around $32 a barrel. This is up over 30% from a few days ago.

The surge will give European crushers hope for a rebound in demand in the biodiesel sector while they cope with a slump in demand in the food sector. Demand is approaching 50-60% of normal off-take, which is largely driven by a slowdown in the catering restaurant trade. Stories in recent days that Canada had resumed canola exports to China have proven unfounded which will help to maintain the flow of European oil to the country which is helping to remove some of the surplus production in Europe.

• South American soybean crop shrinking

On the supply side, the main interest has focused on the South American soybean harvest. Dry weather in southern Brazil and Argentina has trimmed trade estimates for the total South American crop to 169.5 million tonnes. This is a massive 10.5 million tonnes down on the last USDA forecast and would be three million tonnes down on last year's crop output.

 FERTILISER

• Nitrogen

It has been another busy week, as demand for fertilisers continues due to drilling and good weather conditions. Prices remain unchanged from CF Fertilisers; however, Yara prices have increased due to higher replacement costs with the change in exchange rates. Imported stocks are drying up, both with ammonium nitrate (AN) and urea, with only small volumes now due into the UK.

CF Fertilisers' production continues in the UK with the full range available (Nitram, nitrogen sulphur and NPK compounds) and looks to be the best option for prompt movement.

Logistics are now proving difficult as some hauliers have had to park up vehicles due to the lack of back loads, putting higher than normal pressure on all fertiliser deliveries. We would recommend all fertiliser requirements for the next six weeks are covered in good time.

• Blenders

Demand continues, making spring 2020 a difficult one. This week, exchange rates pushed costs for replacement raw materials higher just as demand kicked in. Furthermore, there has been a delay with DAP into the UK due to loading issues and vessel unavailability for moving products. Most blenders in the UK are now full until week commencing 20th April. To keep ahead of the post-Easter demand, we again recommend advance booking of your requirements to secure products and logistics in time. Your Frontier contact can keep you updated on options and availability.

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.