Frontrunner - 6th April 2023

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WHEAT

• Russian export uncertainty rallies markets

London wheat futures fell lower again this week, with old crop prices falling close to multi-month lows, the lowest since the 22^nd of March. Selling was encouraged by lower world markets and what is likely to be a significant UK carry over stock from this season into next.

It is estimated that the end of March wheat exports will be just ahead of 1.3 million tonnes. However, with fresh export sales opportunities hard to find and stalling demand for domestic animal feed and ethanol, it seems inevitable the end-of-season stock level in the UK will rise close to a burdensome 2.5 million tonnes.

The weight of old crop wheat has pushed the London May 2023 futures position to a £16/t discount to the November 2023 position. This highlights the stock burden, although there is the opportunity for farmers and commercial operators who can roll stock into the 2023 season.However, with a large 2023 UK wheat harvest expected and a need to create space for it, this will not be an option for the majority and price pressure seems likely to continue.

Export opportunity is limited because of cheap Ukraine wheat supplies being offered into traditional UK export destinations, such as Spain. With concerns the Black Sea export deal will not be renewed in May, there is a push to ship as much grain as possible before the deadline. Reports of ships loading without sales contracts highlights the significance of the problem and the amount of competition UK supplies will face during the coming weeks.

Ukraine, Russia and Australia all look set to produce smaller crops than this season and there are questions over US winter and spring wheat potential. However, at home, the UK looks set for a high yielding 2023 crop – this is also forecast for the EU. In the short-term, this leaves an improved wheat price outlook challenging. To date, Ukraine wheat imports to the EU stand at 4.5 million tonnes. Despite protests from Poland, Hungry, Latvia and Bulgaria - against cheap Ukraine grain undermining their domestic prices - Brussels extended tariff free imports of Ukraine grain through to June 2024.

• US farmers expand wheat and corn area

Late last Friday, the United States Department of Agriculture (USDA) updated its estimates for US farmer planting intentions and March US wheat and corn stocks. For US wheat there was a surprising increase in the estimated winter wheat area planted - 37.5 million acres. This is up by 550,000 acres on the USDA Outlook Forum estimate made in January and 1.25 million acres up on average trade expectations. It is also 4.3 million acres higher than 2022, with almost all the increases appearing in Kansas.

Kansas has suffered the worst of the prolonged drought and even if the planted area is accurate it is likely that the amount harvested will be notably lower given the poor crop ratings - just 19% of the area is considered 'good/excellent'. A high abandonment rate is likely.

Some market negativity was offset by a lower-than-expected spring wheat area, which at 10.6 million acres is 350,000 acres lower than average trade estimates and 235,000 acres below last year. There is also concern for planting given the long winter and extensive snow cover. Minneapolis spring wheat futures rallied post report. End of March wheat stocks - at 946 million bushels - were 11 million bushels below average trade estimates, but 83 million bushels down on the year.

US corn stocks were 69 million bushels lower than trade estimates and 357 million bushels down on the year. Planting intentions at 92 million acres were 1.1 million above trade estimates and 3.4 million bushels up on the year.

US wheat and corn futures sank lower during the week, with traders seeing favourable weather forecasts and warmer weather benefitting spring drilling prospects and the potential for intentions to become reality. US weather will be a key market driver over the next few weeks.

BARLEY

• Old crop barley down again

Old crop feed barley has come under more pressure this week, with prices slipping a further £5-6/t down nationwide. Demand from compounders is still not forthcoming, with instances of them selling barley back into the market because of lack of demand. A potentially sizable surplus is believed to be left on farm. Combine this excess supply with little domestic demand, a recovery in prices seems very unlikely at this stage. We have seen a slight increase in export demand this week, with Spain looking for UK barley. However, this isn't going to be sufficient enough to clear the surplus of barley.

Malting barley has also been slow this week, with the small demand we have seen coming from short covering from the trade. Consumers appear well covered for the rest of the current season.

• Spring barley plantings well underway

New crop barley has got off to a good start, both in the UK and on the continent. The French winter crop is in the best condition it has been for a decade. UK winter barley plantings are looking well for this time of year, with ample rain and largely temperate conditions. Some central and southern areas of the UK have up to 70% of their spring barley planted and with some clear days forecast over the Easter break we expect this progress to continue. Growers are yet to commit much of their new crop malting barley - we would need to see continued favourable weather conditions for some time before we see greater selling from farmers. 

OILSEED RAPE

• Excitement followed by disappointment in this week's rapeseed market

This week started volatile, following the unexpected news over the weekend that the Opec+ (The Organisation of the Petroleum Exporting Countries) which includes major producers Saudi Arabia, Iraq and Russia, would cut crude oil production by around one million barrels per day. This sudden news from mineral oil markets quickly filtered through to the vegetable oil markets and in turn May rapeseed futures closed €14/t higher on Monday. However, the sharp downwards movement in the market on the following two days demonstrated that we are far from being in a normal situation. The huge available supplies of imported rapeseed from Australia, Ukraine and other countries continues to erode any bullish elements that were added to the market - keeping rapeseed oil at unusual discounts to virtually all other vegetable oils.

New crop is a slightly different story, with participants in the Canadian market starting to become concerned about planting conditions. Heavy snows are due to melt in the US which will bring late spring floods affecting parts of Canada. Conversely, Australia remains dry which will not help its planting prospects. Crop conditions in Europe are good, with the potential for a larger crop than last year still a possibility.

 PULSES

Despite dramatic moves in the grain and oilseed markets this week, we have seen very little change in old crop bean values. As reported for the past three months, the UK market is over supplied with old crop feed beans and further exports of a least 50,000 tonnes need to be seen if there is to be any possibility of turning this around.

This week we have seen a renewed interest in green peas that are suitable for human consumption, as well as for micronised peas, with values now nearly £100/t more than feed beans.

 FERTILISER

• Urea/AN

There has been a slight softening in the European ammonium nitrate market. However, this hasn't had an impact on the competitive domestic price. UK importers of ammonium nitrate continue to struggle in the spot market due to geopolitical pressure and higher comparable European gas prices. Ground conditions have been poor following recent weather, so UK growers are now playing catch up with fertiliser and spray applications, as well as spring plantings.

The UK market is likely to buy additional product once the larger, middle applications have been made so that nitrogen programmes can be completed. Growers will have their pick of nitrogen options, as UK ammonium nitrate and imported urea are available.

• Liquid

With an improvement in weather across the UK since the beginning of the month, urea ammonium nitrate applications have picked up in pace. Growers with additional requirements for nitrogen and nitrogen sulphur products continue to have access to a full portfolio of grades for prompt delivery. Terms for foliar urea products for application on milling wheats are expected to be available later this month, for both bulk and (IBC) delivery.

• PKs

The expected potash weakness has now occurred, although sooner and greater than expected with a £70/t reduction. This is slightly too late to support potash inputs for the 2023 crop and is a good sign of further weaknesses on costs for the 2024 crop. There have only been small weaknesses on phosphates over the last week. However, this follows the same overall downward trend as seen in the first quarter of the year.

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