Frontrunner - 6th February 2025

WHEAT

• Tariff trouble

Comments made by President Trump that Canada and Mexico would be hit with 25% tariffs on exports into the US, and China with tariffs of 10%, signalled a challenging week for commodities. Early trade for wheat futures was unsurprisingly lower, with traders concerned the tariffs would slow trade and therefore the sales pace for US commodities.

When news broke that the tariffs for Mexico would be delayed for at least a month, following positive conversations between President Trump and the Mexican president, Chicago Board of Trade (CBOT) regained its losses and then moved to a higher to close. Mexico has been the largest buyer of US corn exports this season, so maintaining free trade is key to maintaining futures values.

US markets seemed to be encouraged by only a targeted retaliation from China, with reactive tariffs against President Trump's blanket 10% tariff on Chinese imports. The fact that US agricultural commodities were not targeted and can maintain free trade galvanised the enthusiasm of speculative buyers.

There is a mixed picture with US winter wheat crop condition. Primary producer Kansas saw a three-point improvement on the month, up to 50% 'good/excellent', whilst Oklahoma and Texas dropped five points each and Nebraska lower too.

Mid-week, CBOT wheat futures moved to their highest level since 12^th November last year.

• Corn questions

Despite having a large wheat crop that is almost three million tonnes up on last year - over 18 million tonnes - Argentina's corn production potential remains in doubt. In January, the United States Department of Agriculture (USDA) were optimistic that a crop of 51 million tonnes was achievable, although other local estimates were as low as 48 million tonnes. Reflecting on last month's weather pattern, the challenges maximising yield potential are highlighted by data showing that January was the warmest for 21 years and the dryest for 12 years, with rain 48% below normal.

Second corn crop planting in Brazil remains troubled, with primary producing region Mato Grosso only 6% planted as of last Friday, compared with 24% last year and an average of 19%.

With world corn stocks already set to fall by 24 million tonnes on the year, and once tariff fears had eased, fund managers added to their current purchases taking them to an overall long of 50 million tonnes.

• EU still needs demand

EU wheat exports were at only 325,000 tonnes during the week, bringing the cumulative total to 12.505 million tonnes - 7.2 million tonnes down on the year. With imports of 900,000 tonnes, the UK is still the third largest buyer of EU wheat, which highlights the present domestic situation of over supply maintaining further price pressure.

On Monday, comments by President Trump suggesting the EU was next in line for US tariffs sank the euro by over 1%. Paris wheat futures took the positivity from the weak euro, which effectively made EU commodities more competitive in export markets and moved higher.

Last week, Russian wheat exports reached 590,000 tonnes, indicating a 50% reduction in pace when compared to the first half of the season. With the country's quota now in play until June, there is scope for about half a million tonnes each week, which should provide some future opportunity for EU exporters to catch up.

However, Australia could be the next obstacle to compete with, as crop estimates improve. The previous Australian Bureau of Agricultural and Resource Economics (ABARES) estimate was 31.9 million tonnes and the USDA estimated 32 million tonnes, but trade estimates now range from a minimum of 32 million tonnes to as much as 35.5 million tonnes. If this proves to be the case, it will add to the burden of wheat in the southern hemisphere for the second half of the season.

BARLEY

• Feed barley markets remain rangebound

Old crop feed barley values have not moved significantly over the past week as farm selling matches the pace of fresh demand. Much of the feed barley demand is to trade buyers rather than fresh compound business, with many merchants bidding into south-eastern ports following export trades done during the past three weeks.

These export bids have provided a bottom in the market for what was the cheapest ex-farm prices in the UK, however prices further north - which are reliant on the domestic market - have come under some pressure given the lack of fresh compounder and export demand in these areas.

New crop demand continues, with feed barley trading at approximately a £15/t discount to feed wheat across the country. Farm selling has slowed after a strong start to the new year, but compounders seem happy to take cover at these levels. A £15/t discount to feed wheat is much lower than we have seen for the last 12 months, but the reality is that crop '25 will be smaller, with a slightly lower winter barley area year-on-year and a more significant decrease in the spring barley area. At this narrower discount, domestic demand should decrease year-on-year, as some demand will be switched back into feed wheat, but barley has little reason to widen its discount when the spring barley is not planted.

• Malting barley market still quiet

Malting barley markets remain quiet due to the same lack of demand for a good quality UK spring barley crop. Some malting barley is now moving to feed homes, in areas away from the ports and maltsters, especially those of borderline quality. New crop plantings are yet to get underway. As spring approaches this will become the focal point in the UK and northern Europe.

OILSEED RAPE

• Volatility in rapeseed prices

Volatility in rapeseed prices is currently high, with international politics dictating trade flows. Imposition of US tariffs on Canadian canola theoretically would push more into Europe. Despite this news the market barely reacted, indicating that traders and crushers were expecting this to happen and that it was already priced in.

Rapeseed crushers are still well covered until the end of the season - helped by Australian imports - although for further requirements seed is not particularly easy to buy domestically, leading to a rather directionless market, despite the intra-day volatility.

Coming into the new year, previous bearishness in the soybean market has diminished slightly due to the deterioration of crop prospects in South America caused by high moisture levels in the area. The global surplus is still set to be large, but not quite as large as traders expected two months ago.

Currently, rapeseed oil prices are also having a tough time, due to the biofuel supply chain and its correlation with crude oil values, which have fallen recently. This reduces margins for crushers and so decreases their appetite to pay higher prices for rapeseed.

 PULSES

• Feed beans

UK old crop bean values have come down this week due to the increased supply for nearby positions. Some domestic demand remains for the April-June position, which with the pace of selling will shortly be filled.

In terms of export, UK beans are offered at a discount to Baltic beans, however buyers continue to hold back any firm bids in the hope that the UK values will come down a further five euros. What happens first remains to be seen – will the Baltic supply run out, or the UK value fall further?

There have been very few new crop bean markets so far, with most UK compounders not wanting to make early buying decisions and exporters not prepared to commit until they see more spring bean plantings.

Other protein sources continue to look better value compared to new crop beans. We continue to offer our Bean Buyback Option at £30/t over the London International Financial Futures and Options Exchange (LIFFE) November wheat futures. Please contact your local farm representative for more information.

 FERTILISER

• AN/Urea

The end of last week saw domestically produced AN terms for March delivery withdrawn from the market, leaving April terms only, highlighting the tightness of supply for good quality AN available for UK growers. To support this messaging, we have also seen the third price increase this year in Europe on AN and CAN, along with further reports of production plants closing or reducing production due to continued high energy prices.

Natural Gas prices in Europe have reached new highs, reaching €54/MWh, compared with €29/MWh this time last year. This information all leads to further expected increases on pricing levels and tightness around supply. In addition, the EU has put forward a plan for import duty on Russian nitrogen products to protect European markets and food security. The EU has imported 30% of its requirements from Russia in the last year, therefore when (not if) the duty is applied, changes in supply chains will put pressure on the market from July 2025 onwards.

With the most recent Indian tender falling short on volume once again, it is expected that the country will return for another round soon. Out of 1.5 million tonnes tendered, only a third of the volume has been covered - what volume the next tender will be for is unknown at this stage.

Egyptian urea continues to creep upwards, trading at $445 FOB earlier this week, with Europe, Turkey and the US facing supply shortfalls.

Please speak to your Frontier representative for all options available on N sources.

• UAN/Liquid

As we approach spring applications, growers with capacity to take product ahead of usage are encouraged to do so. UAN pricing remains competitive for both nitrogen and nitrogen sulphur systems and an extensive delivery network ensures growers will have product on farm in a timely fashion. At present a full portfolio of UAN grades is available, along with NP and NPK products, with the option to include sulphur in these mixes. Root, cereal or forage growers with a requirement for quality products at placement are recommended to contact your local Frontier representative to discuss the options available.

• PKs/NPKs/straights

Like the nitrogen market, potash and phosphate levels remain firm. Tightness around product availability and cost of production has seen a further price increase on phosphates in the last week and this will impact on pricing for PKs and NPKs. It is worth considering options on solid NPK compounds and liquid NPKs for products that are readily available.

Potash and associated products remain firm and there is a level of uncertainty around forward pricing due to reports that the US are looking to implement a 25% duty on potash imports from Canada, which in turn could impact other trade flows and the UK market values.

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