Frontrunner - 4th December 2020

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WHEAT

• Wheat markets take a bearish turn

US Chicago Board of Trade (CBOT) wheat futures continued to fall this week and by close of business on Thursday were 10% below the 4-year highs they peaked at in October. The increasing size of the Australian, Canadian and Indian wheat crops as well as a proposed increase in Russian export quota combine to signal ample wheat supplies and a bearish feel to markets.

The Australian Bureau of Agricultural and Resource Economics (ABARES) increased its official Australian wheat crop estimate to what would be the second highest on record at 31.17 million tonnes. However, some private analysts see the potential for up to 35 million tonnes, which would equal the previous record set four years ago. Australian wheat futures have dropped to a 13-week low, highlighting the need to be competitive in export markets while still facing what is, effectively, a ban from the Chinese market.

India is not traditionally a wheat exporter, but its wheat stocks are set to rise by seven million tonnes this year to 31 million tonnes. This week, China sold a quarter of a million tonnes of wheat to Bangladesh, undercutting Black Sea competition by $10/t. It would seem there is potential to significantly exceed the USDA export target of one million tonnes.

Russia is considering increasing its February/June export quota to 17.5 million tonnes but may well find that hard to achieve given competition from Australia and India. By the end of November, it is expected that Russia will have shipped a staggering 20 million tonnes of wheat since the season began on 1^st July.

Meanwhile, in its latest production estimates, Statistics Canada (StatCan) put the current season's Canadian wheat crop at a seven-year high at 35.2 million tonnes, which exceeds traders' previous expectations. However, this is not particularly a game changer considering the USDA November estimate is similar at 35 million tonnes.

• Concerns for Russian winter wheat plantings

Mixed reports of Russian winter wheat crop conditions suggests not all is well for the world's leading wheat exporter, although the potential of its 2021 crop is unlikely to be established until the spring. Russian farmers have drilled 19.3 million hectares; up from 18.2 million hectares last year. The crop was drilled into historically dry soils and recent condition data is concerning. Analysts say 22% of the crop is in poor condition; the worst it has been since 2013 for this time of year. Furthermore, it is reported that 13% of plantings have failed to emerge, which is about 2.5 million hectares. Exposed crops may endure temperatures falling as low as -20°c. Initial 2021 Russian wheat crop estimates range from 78 to 83 million tonnes.

• European wheat prices pressured by foreign exchange

European wheat prices are being pressured by the continued strength of the euro against the US dollar. The euro continued to climb this week, reaching its highest level against the dollar since April 2018. The consequence of this is that European wheat prices need to fall to allow exports to remain competitive on world markets. Meanwhile, as Brexit negotiations near their conclusion, the volatility of the pound continues. The outcome of the Brexit negotiations, whether the UK leaves with or without a deal, is likely to have a notable impact on the pound and influence domestic wheat prices. Whether this will be for better or worse is yet to be seen.

POOLS

There has been plenty of uncertainty in world and domestic prices this year. However, the Frontier pools represent a secure way to market your crops. By committing a proportion of your crop to the Frontier pools, you can manage your risk when it comes to marketing your grain. Please take this opportunity to watch this video from our Origination Manager, Andrew Hill, which explains how our pools work and the benefits to growers.

BARLEY

• AHDB Early Bird Survey released

Last Friday, the Agriculture and Horticulture Development Board (AHDB) published the Early Bird Survey, which details national cropping intentions for 2021. Unsurprisingly, the survey shows there will be a shift back to larger areas of winter drilled crops. The 2021 cropping intentions outlined by the survey show a 24% increase in the winter barley area to be drilled and a reduction in the spring barley area of 30% in comparison to crop 2020.

• Markets faced with Brexit uncertainty

Brexit uncertainty continues to dominate the entire barley market, which is still awaiting clarity on trading arrangements from the 1st January. Potential tariffs of €93/t on exports to Europe would be prohibitive to both UK feed and malting barley. Exports continue to ship this December.

• Poor demand for malting barley

The malting barley market continues to struggle with demand destruction as a result of Covid-19 and the outlook for 2021 is equally uncertain. While news of an approved vaccine is positive, it is not enough to instil confidence in brewers and distillers who are finding it difficult to forecast demand. The expectation is that malting barley demand will continue to be significantly down for the remainder of the crop year.

The uncertainties impacting old crop are just as prevalent for new crop barley. Frontier has a range of contracts that we can offer growers to minimise risk, including our Frontier pools, which were discussed earlier in this report. Find out more at www.frontierag.co.uk/pools.

​OILSEED RAPE

• Dramatic fall in UK crop 2021 plantings

The old crop domestic market has remained static this week with little change in prices. The key point of interest in recent days has been looking forward to the prospects for the 2021 crop. This interest has been sparked by the release of the AHDB Early Bird Survey.

However, it should be remembered that it the survey only outlines grower intentions. Due to its timing, the predicted areas of spring crops are inevitably less reliable than those for autumn sowing. However, the UK's rapeseed crop is almost entirely winter-sown and the predicted 18% drop in rapeseed plantings to 318,000 hectares will likely prove to be pretty close to the final outcome. This would equate to the smallest planted area since 1986 and only 42% of the area sown as recently as 2012. In this time, the UK has swung from being an exporter of rapeseed to the current position where our crush capacity is well in excess of our ability to produce supply. The prevalence of the cabbage stem flea beetle has affected crop profitability and the industry is continuing to seek ways of managing this issue going forward.

• Global stocks remain tight

For global oilseeds markets, the December USDA report, due out on December 10th, is the next key moment. In recent days, we have seen US soybean futures markets hit three-week lows with fund, or speculative, long holders leading a sell-off after parts of Brazil received some welcome rain onto their parched spring crops. However, extreme drought conditions in Argentina and Brazil will require a solid month of rainfall to give crops any chance of a decent recovery. The forecast rain is patchy at best and the trade is bracing itself for a further tightening of year end stocks in next week's report.

PULSES

• Feed bean market tentative

Feed bean prices remained firm this week, around the £210/t ex-farm level despite limited new demand. Helping these prices is the relative firmness of most other feedstuffs, which is due to current tight supply flows in the market. Human consumption premiums have diminished as the Australian crop continues to show good quality. New crop beans can currently make around £30/t over November wheat futures. This week, this is around £187/t ex-farm, which is historically a good value at this time of year. Contracts are available, so please contact your farm trader to find out more.

• New crop peas proving popular

The trade is reporting strong demand for new crop pea contracts as growers become more comfortable with peas as a spring cropping option. Seed and contract supply is limited; please talk to your on-farm contact as soon as possible if interested.

Old crop, free market Marrowfat and Large Blue values are firm, with the best quality samples fetching attractive premiums. Feed peas maintain strong value due to the expense of imported material. Domestic demand is partly switched off due to these relatively high prices but some limited demand remains. If the opportunity arises to sell into the feed pea market, prices are the firmest we have seen in recent years.

FERTILISER

• Nitrates/urea

European nitrates firmed again this week with Yara moving prices €5/t higher in Germany and Benelux region early Monday morning. CF Fertilisers soon followed later on Monday with a further £5/t onto the December and January Nitram and Nitrogen Sulphur grades. CF Fertiliser prices are still lagging behind European levels as they have been all season but, as we get closer to usage, it will be all about supply and logistics.

The urea markets saw India return to the tender process and at this stage, the country has confirmed around 1.3 million tonnes of granular urea for shipment before the 6^th January. Demand in India continues to be strong. This will certainly keep granular urea supplies tight through to the end of January/February, meaning it could be too late and prices too strong to entice any new UK shipments this season.

• PKs

It has been another week of good demand on MOP, TSP and PK grades. Many farmers are now keen to take some cover before the new calendar year as replacement cargoes of TSP and DAP look much firmer than in the summer. European buyers are also doing the same, which is pushing demand and causing further logistical issues for the spring.

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.