By Frontier Trading Desk on Friday, 03 February 2023
Category: Market information

Frontrunner - 3rd February 2023

US wheat production prospects for the 2023 harvest remain in question following a period of challenging weather conditions, also taking into account an increase in the planted area. In January, the United States Department of Agriculture (USDA) estimated US farmers had planted 36.95 million acres - an 11% increase on the year. Although others estimate less, if this growth is accurate there is a question around how much of that area will provide a crop. 

You can also listen to the Frontrunner podcast - press play to hear the latest report. The report this week is read by farm trader, Sophie Whiteman.

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Frontrunner is also available as a podcast, so you can hear the latest from our traders while you're on the go. Listen below or subscribe to the report on Acast, Spotify, Apple Podcasts and Google Podcasts. The report this week is read by farm trader, Sophie Whiteman.

WHEAT

US wheat production prospects for the 2023 harvest remain in question following a period of challenging weather conditions, also taking into account an increase in the planted area. In January, the United States Department of Agriculture (USDA) estimated US farmers had planted 36.95 million acres - an 11% increase on the year. Although others estimate less, if this growth is accurate there is a question around how much of that area will provide a crop. Over 70% of it was in drought heading into the winter period but wheat prices came under pressure last month as rain and snow fell, providing some element of precipitation to help replenish soil moisture. Now though, the current extreme cold weather could prove damaging, as was the case before Christmas when little snow cover was present.

This week's latest crop ratings from the USDA provided little encouragement. Primary winter wheat producing state Kansas showed a 2% improvement on last month to 21% 'good/excellent'. However, this rating is still the worst for this time of year since 2018. Back then the percentage of 'poor/very poor' was 44%, but now it is up to 47%. The third largest winter wheat producing state Oklahoma has seen a sharp fall in conditions from 38% 'good/excellent' in January, to only 17% now. This helped US wheat futures rise to their highest since the second trading day of 2023.

The Russia/Ukraine conflict is continuing to have a negative impact on agriculture in Ukraine and is likely to worsen for the 2023-24 crop year. Ukrainian agricultural producers said the Ukraine grain harvest is likely to fall to between 35 and 40 million tonnes in 2023; this includes 12 to 15 million tonnes of wheat and 15 to 17 million tonnes of corn. They said low wheat output could result in local shortages which could potentially lead to restrictions on food wheat exports. Officials from the Ukrainian Agricultural Ministry are more upbeat and see the grain harvest achieving 49.5 million tonnes and saw no need to restrict exports. However, a licensing process allows exports to be monitored and if there was a risk to the supply and domestic consumption, the ministry reserves the right to restrict exports.

Russian grain transport company, Rusagrotrans, lowered its Russian wheat harvest estimates for 2023 by one million tonnes to a total of 81.5 million tonnes because of crop damage. It stated that an 'ice crust' had formed against the ground in several regions because of sharp temperature fluctuations, which increases the area of winter crop damage and reduces the yield of remaining fields. Last week, comments that 98% of the Russian winter wheat was in good condition may have been misleading.

Official EU weekly wheat export numbers jumped by 638,000 tonnes to a total of 18.780 million tonnes, which is ahead of the weekly pace needed to clear the surplus. The official numbers still don't fully account for all vessels loaded, with private estimates putting wheat shipments over a million tonnes ahead of them. The further west you travel in mainland Europe the less there is remaining to be sold, with some consumers paying milling prices for feed wheat. However, in the east the opposite is the case, with notable unsold farm stocks and little fresh export demand. Supplies from Romania and Bulgaria need to compete with continued cheap offers from Ukraine and Russia in export markets. Russia dominated the cheapest offers made to Egypt in its latest tender this week. Euro strength is not helping its effort, with the EU currency rising to a ten-month high compared with the US dollar. Russian wheat exports remain high, with those in January likely to be up to 3.8 million tonnes. This is comparable to the average for this period which is usually 2.7 million tonnes.

BARLEY

London feed wheat futures have rallied this week and export sales have been made which were helped by weakening sterling. However, because feed barley was already too small a discount to wheat to attract any buying interest from livestock producers, the feed barley market has hardy moved – rather it's a bigger discount to wheat than it was a week ago. Demand is lacking due to a smaller UK pig herd, which is down around 11% when compared with last year and shows no signs of increasing over the next six months. Herds are also smaller elsewhere in the EU27, but not by quite as much.

Unlike old crop, there has been some interest from feed mills to price up supplies for August onwards. No major volumes sought but a sign of better interest once the next six months has passed.

There has been no maltster interest in further malting supplies this week and there are still merchant long holders of UK cargoes who are looking to sell. There has also been some selling pressure in Denmark, (a major EU exporter) this week and prices have dropped €6/t. Its supplies are at a significant discount to most other origins in Europe as the country seeks to lower long positions before the sowing season starts.

Drills have been out this week on the Lincolnshire Wolds and farmers have taken advantage of the recent dry spell, with warmer temperatures and nice winds helping the soil to dry out. Some spring barley was sown on the frosts during December and January on other light land in regions such as Cambridgeshire.

Frontier has minimum and maximum premium malting barley contracts which offer an attractive premium to support the cost of growing and storing a quality crop. Please speak to your local farm trader for more information.

​OILSEED RAPE

Rapeseed values have regained a significant proportion of what they lost after the proposal from Steffi Lemke, the German Federal Minister of the Environment, to remove all crop-based content from German biofuels. The market has now disregarded much of the sentiment around this proposal, as any changes would not apply in the short term and it feels as if the proposal will be rebuffed by other departments of the German government.

Elsewhere in the oilseeds complex, soybeans have continued their upward trend due to a lack of sustained improvement to weather in Argentina which has been lending some support to other oilseeds markets, such as rapeseed. However, the Brazilian soybean harvest is approaching and expected to be sizeable, which will weigh on prices.

This week, China also returned from its week-long New Year celebrations. Its return to market has been marked by steady early purchases and now the market will be keenly watching the speed of the country's economic recovery and, in turn, its oilseed demand. China's requirements will be key to the global oilseeds balance sheet going forward.

For rapeseed, it is a question of how cheap it can get in comparison to other oilseeds before demand hits capacity. Many EU crushers have switched from crushing soybeans to crushing rapeseed due to the attractive margins on offer and the strong demand generated by the relative cheapness of rapeseed. However, it will be challenging to fulfil this demand considering the production increases that have been seen throughout this crop year.

 PULSES

Demand for old crop beans is certainly picking up but only for May through to September. This demand is driven by compounders now seeing beans as better value compared to other midrange proteins such as rape meal or distillers' pellets. Unfortunately, unless we see some more export interest then it is unlikely that the UK demand alone will be sufficient to consume the large number of beans still left unsold on farm. Old crop feed peas are still commanding a premium of £30-40/t to feed beans. Please tell your Frontier farm trader if you have any old crop peas available for sale. 

 FERTILISER

UK and European gas prices are relatively stable but weak. New season urea terms have been released into the UK market, but at this stage there is little interest from growers at the levels offered. This, coupled with the projected legislative changes around the use of straight granular urea rather than using a protected urea source mean it remains to be seen whether there will be much interest for the coming crop year.

Whilst urea prices for spring 2023 usage are competitive in comparison to ammonium nitrate, growers should take into consideration the potential impact warmer/dryer weather conditions can have. These can lead to ammonia losses through volatilisation and ammonium nitrate is always the best option as the nitrogen source. The reduction in the global granular urea price was mostly caused by supply overtaking demand in Europe, with factories producing product but no firm end buyers willing to commit to purchases of urea.

In the last week, we have seen some corrections in ammonium nitrate values in the UK market from imported producers but no change in price on UK nitrogen. Volumes offered are likely to be small but this drop in value hasn't encouraged many growers into buying ammonium nitrate - even at the cheaper levels. Decisions will need to be made on purchasing very soon so that product is on farm in good time for usage.

Please speak to your Frontier contact for information on the right products to purchase for your requirements for spring onwards.

As we enter February - when we'd traditionally see first applications of nitrogen sulphur applied on winter cereals - growers who need to secure additional volumes of UAN are advised to talk to their Frontier contact. Applications through the season should include Limus® Clear, a urease inhibitor for inclusion within UAN. It's worth noting that from next spring onwards you will be required to include a urease inhibitor with any applications of urea or liquid fertiliser after 1st April.

There has been no change to UAN values in recent weeks and UAN pricing continues to track the UK AN market.

MOP remains stable, although we have seen a slight decrease in phosphate values. Similarly to last week, on-farm purchasing activity has increased on PKs and NPKs on the back of the price correction. This increased activity is also because the usage period will soon be upon us and growers are starting to think about their P and K requirements.

Raw material supply for blends and straights could become an issue, as many suppliers haven't been willing to commit to purchasing P and K for spring and are still unsure of when to buy on the back of the price correction. However, Frontier has a range of compound NPKs that are readily available for collection. Planning your spring requirements with these points in mind is advisable.

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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