Frontrunner - 3rd December 2021

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WHEAT

  • Omicron triggers panic selling

Wheat markets have endured a volatile week of trading, as traders and speculators reacted to the uncertainty of the latest Covid-19 variant Omicron and what it might bring. Having peaked at nine-year highs last week, Chicago Board of Trade (CBOT) wheat futures lost over 10% of their value by close of business on Tuesday. This was due to a wave of panic selling, which caused prices to tumble. European wheat futures made similar losses from their record highs last week.

However, the tight world wheat balance sheet and the availability of milling wheat from the world's major wheat exporters remain a concern. The lower wheat prices led to several of the world's major importers issuing fresh wheat tenders, the most significant of those from Egypt. Egypt bought 600,000 tonnes, including 240,000 tonnes from Russia and 240,000 tonnes from Romania. The final 120,000 tonnes it purchased from Ukraine. Prices ranged from $376-379/t including freight for January delivery and, on average, represented a $6/t increase in price over the solitary cargo Egypt bought from Romania on the 17th November.

Turkey, Tunisia and Jordan were among other countries that bought wheat and there were reports that China had bought from Australia. Saudi Arabia is looking for offers of over 500,000 tonnes of wheat for May and July, which has added to the extensive wheat buying interest that helped markets recover half their losses by the end of the week.

  • Record Australian wheat

The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) has updated its latest crop production estimates and foresees Australia producing a record wheat crop of 34.4 million tonnes. Favourable growing conditions during October, with mild temperatures and ample rainfall for most of the wheat growing regions, have helped yield potential, particularly for Western Australia, which is expected to harvest a record 21.2 million tonnes. On the face of it, this delivers a bearish element for world markets and contributed to some of the market negativity earlier this week. However, heavy November rainfall has delayed harvest and proved damaging for eastern states and parts of southern Australia. New South Wales has seen one of its wettest Novembers on record, which resulted in flooding. This led to some crop losses for growers and a loss of crop quality. The loss of quality, despite the overall expected record wheat crop, further tightens the availability of bread wheat supplies for the world's major importers and maintains a bullish outlook.

  • South America upbeat

One of the primary wheat price drivers last season came from the influence of failing corn production in South America, amidst strengthening Chinese import demand. However, analysts' expectations remain high for this season's production prospects. For Argentina, the Buenos Aires Grains Exchange (BAGE) sees the corn area expanding to 7.3 million hectares following beneficial rainfall and it predicts a potential record crop of 55 million tonnes. Prospects for Brazil are also upbeat with private analysts seeing an expanded drilled area, leading to the potential of the country producing 120.1 million tonnes. Last season, the late-drilled second crop, which was late due to the delayed soybean harvest, suffered from poor establishment, drought and then frost damage. This led to the overall crop falling to 86 million tonnes. The prevailing La Niña weather phenomenon, however, remains a threat to crops during the Southern Hemisphere summer, which lasts from January through to March.


BARLEY

  • Barley not as volatile as wheat on the week

UK feed barley values have not mirrored the volatility seen in the wheat market over the last seven days. Instead, as wheat values fell over the first five days of the week due to the rise in cases of the Omicron variant of Covid-19, barley narrowed its discount to wheat to as little as £4/t in some areas. However, that discount has once again widened with wheat markets rebounding higher yesterday in particular from the lows of the week.

Even at smaller discounts, barley remains competitive in the feed ration, as the cost of imported products remains high, although margins are under pressure in several livestock sectors due to the rising feed and input costs. Feed demand will be watched closely into the new year.

  • Malting premiums remain firm

Malting premiums remain attractive for growers heading into the new year, as the UK continues to ship its malting barley surplus to the EU. New restrictions on movement and social gatherings across Europe to combat the spread of the Omicron variant do pose a risk to human and industrial demand of malting barley. However, for now, the tight global balance sheet is keeping values underpinned.

Frontier has a range of malting barley contracts to offer for both crop 2021 and 2022, please speak to your local farm trader to discuss details. 


OILSEED RAPE

  • New Covid-19 variant weighs in heavily on oilseeds markets

This week, news of the new Omicron variant weighed in heavily on oilseeds markets with end users - In particular, biodiesel producers - assuming the worst and anticipating lockdowns reducing demand. On Tuesday 30th November, the rapeseed market reached lows not seen since the middle of October, around £55/t off the elevated levels seen just two weeks prior. Since the lows, rapeseed and the wider oilseeds market have staged a strong recovery but further negative news on the new Covid-19 variant could send things plummeting again.

  • Australian crop expected to hit record levels

Earlier in the week, ABARES released a record crop number of 5.7 million tonnes for Australia. This added to the weakness in the market at the start of the week. As the trade accounts for more seed availability in the market - much of which is destined to flow into the EU - the overriding question is: when will this supply be able to make it into the European market? With many commodities fighting for access to Australian ports, swift trade into the EU is proving problematic. 


 PULSES

  • Market remains unchanged

Dwindling supplies of human consumption beans and continued demand from Egypt has maintained the upward value of the best quality food beans. Currently, premiums of food over feed values are running at £60/t. However, this is unlikely to be maintained, as it is only a matter of time before the first cargoes of Australian beans start arriving in Egypt. Additionally, with Australia having higher quality than achieved in the UK, buyers preference remains with the Australian supply. Despite the recent fall and then rise in wheat markets, feed bean values have hardly changed over the past week. There is no new demand in the UK and European buyers are reluctant to pay any more than current values. With over 100,000 tonnes of feed still to trade, it's unlikely that there will be any significant upward moves in feed values. 


 FERTILISER

  • AN/urea

This week has been quieter on the news front in regards to urea, with limited cargoes being traded for smaller origins such as Turkey, New Zealand and Taiwan. India's next tender is due imminently and it's thought it has 1.2 million tonnes of product yet to buy pre-February. This will no doubt add some buoyancy back into the market once pricing is offered. Urea values are currently trading at $950/t FOB from Egypt.

Russia has indicated it will only allow 744,000 of AN to be exported from 1st December until 31st May. This is half the volume traded in the same period in 2020/2021 and demonstrates the ongoing tightness in the market. Sales have been made this week at $770/t FOB ex Baltic, which is $70/t up on previous offers.

What does this mean for the UK market? Stronger domestic and imported AN values will remain for the course of the season and shortness of supply will start to show come the new year once existing cargoes are traded out.

  • UAN

UK liquid nitrogen sulphur markets remain on a price on application basis. It is important to bear in mind that logistics around liquid fertiliser mean that holding out of the market may result in lack of supply for crops once product is required. Please liaise with your local Frontier contact in regards to any product required.

  • PKs

Both phosphates and potash markets remain firm with further price rises on the horizon. Current deliveries are proving to be troublesome with lack of product at many UK ports and November and December sales may roll through to January. This can only further impede a timely execution of sales pre-spring and further demonstrates that growers should act now to ensure that autumn-sown crops are given the required nutrition at the right time.


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. 


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