Wheat markets enjoyed some festive cheer over the Christmas holiday season. Prices moved higher and regained the losses they had made since the end of November. However, this short-term blip reversed in the new year with sharp declines and futures markets headed back down towards multi-month lows.
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WHEAT
- Wheat markets under pressure
Wheat markets enjoyed some festive cheer over the Christmas holiday season. Prices moved higher and regained the losses they had made since the end of November. However, this short-term blip reversed in the new year with sharp declines and futures markets headed back down towards multi-month lows.
A lack of demand and a perceived wealth of cheap Russian wheat is likely to dominate wheat export market share in the coming weeks and this has encouraged selling. Analysts see Russia shipping 3.6 to 4 million tonnes in January, which is slightly below the December shipments. Pressure is also coming from cheap Ukrainian wheat offers and there being no evident immediate threat to the 'safe' Black Sea export corridor.
Towards the end of last month, marine insurers said they would cancel cover across Ukraine, Russia and Belarus. However, this had no apparent impact and has so far provided little if any market support. Nonetheless, any wheat sold from Ukraine will be slow to move as it is reported that 94 vessels are currently stuck and awaiting clearance from the Bosporus; 69 of which are empty for loading agricultural products. Some have been waiting for up to a month.
There are reports that President Putin had a discussion with Turkey's President, Tayiyp Erdogan, on Thursday. President Putin reportedly said Russia was ready for peace talks on Ukraine, but that Ukraine must first accept the loss of territories. Ukraine reiterated its rejection of any peace deal that allowed Russia to keep Ukrainian territory seized by Russian forces.
- Mixed fortunes for US winter wheat
The potential of the US winter wheat crop was challenged by extensive drought conditions heading into the winter period. Winter storms brought some much-needed precipitation in many areas, but the severe spell of record-breaking low temperatures could have resulted in damaged crops from winter kill where crops have been exposed with no snow cover.
The poor condition of US winter wheat was highlighted by updated crop condition ratings for Kansas, which is the primary US winter wheat producing state. The last US national crop rating before the winter showed that 34% of the crop was 'good/excellent' - the lowest at that point since 2012. Currently, the United States Department of Agriculture (USDA) sees just 19% of the Kansas winter wheat 'good/excellent' - down two points from November. Other states with reported condition declines include Kentucky, Montana, Nebraska, North and South Dakota. Condition in Oklahoma, Illinois and Colorado improved.
- Enormous yields for Australia
The Australian harvest continues to swell. Previous estimates from the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) put the crop at a new record for the second consecutive year at a total of 36.6 million tonnes. High rainfall levels resulted in enormous yields and analysts are raising that figure higher to a staggering 42 million tonnes. This will allow Australia to ship record volumes of wheat, with ports now fully booked until the end of April. High yields have diluted protein, which adds a greater percentage of the crop to the feed bin.
BARLEY
- Quiet malting barley market
It has been an extremely quiet week in the malting barley market. A combination of non-existent demand for both domestic or export malting barley and several market participants still on holiday has resulted in little to no trade.
Malting barley prices have come under pressure as sellers have been offering lower prices hoping, without any success, to connect on business. With the size of the exportable surplus and sluggish current export pace, premiums are likely to come under further pressure. Demand uncertainty remains prevalent.
- Manage risk with opportunities from Frontier
Looking forward to crop 2023, Frontier is offering a range of marketing options to help growers manage risk and market their malting barley crops. Guaranteed minimum premium contracts, futures related distilling contracts and malting barley pools are just a selection of the contracts that are offered. For more information, speak to your local Frontier farm trader or read more here.
OILSEED RAPE
- Oilseed prices follow strong run up to Christmas with lacklustre start to new year
In the run up to the Christmas period, oilseeds such as rapeseed, canola, soybeans, palm and sunflower saw substantial gains on the back of a few key factors. These factors included a record drought in Argentina, which affected its soybean crop plantings, and news of China re-opening after its extended Covid-19 lockdowns. Another component that impacted the oilseeds markets was the stronger energy markets which includes crude oil. All of these influences either increased demand for oilseeds and vegetable oils or reduced the supply.
However, on the return from the new year weekend, markets took a southwards turn which wiped out a proportion of the previously seen gains. The reasons for this were seemingly reversals to the factors above. Argentina saw increased and widespread rainfall which gave the market some confidence over its crop production, although much more is needed for the country's crops to progress properly. There was also some rethinking from wider financial markets over the Chinese lockdown situation and whether demand will increase sharply given its relatively weaker economic situation. This notion of weakening economies also filtered through to crude oil markets which shed around 10% in the first week of the year.
Next week, there will be an updated World Agricultural Supply and Demand Estimates (WASDE) report from the USDA which is eagerly anticipated by the trade given uncertainties over South American soybean production.
- Rapeseed detail
If we look at rapeseed in isolation, heavy fundamentals are weighing in on the market again with the world awash with rapeseed this season. Nearby cover throughout the UK and Europe remains strong which leaves only the later periods of the season to be covered. With an abundance of seed available for purchase from imported and domestic sources, this should not be difficult.
European biodiesel/hydrotreated vegetable oil (HVO) demand is set to be stronger this calendar year following strong demand at the end of 2022. This was caused partly by the notable setback in rapeseed prices. Elsewhere in the world, it looks like a strong year for biodiesel demand with ample feedstocks to supply. This is expected to be led by the US, Indonesia and Brazil. From a fundamental point of view, it's unlikely prices will trend upwards from the current circa £500 ex farm levels in England. However, fresh news can change prices quickly and sharply.
PULSES
- Markets have picked up in 2023
Following a very quiet trading period for all pulses between Christmas and new year, this week things have certainly picked up with more beans being traded but at lower levels.
It's becoming apparent that that there are still large numbers of beans left on farm unsold. In previous seasons, values have lifted dramatically in the January to March period as any buyers find it hard to buy fresh supplies after a busy October to December shipping period. This year, the problem is that the 2022 October to December shipping period was quiet. Some vessels were rolled into the new year and, with a lot of beans available, values will be pressured in the short-term.
The only note of optimism is that with other mid-range protein feedstuffs rising in value, beans are once again looking more attractive to buyers for May onwards.
FERTILISER
- Urea/AN
With many on holiday, global demand for 2023 so far remains quiet. Urea prices softened prior to Christmas but for later deliveries into February and March.
The direction of travel will ultimately be determined by demand from India, with tendering decisions being announced next week. As a possible 25% of the UK market is still to buy and there's only a few months of application timings available, it's of utmost importance that those still to buy plan ahead.
The UK's crop conditions will also have a part to play in terms of what amounts of nitrogen products are applied. In general, crops look well and with forward harvest grain values still looking healthy, keeping rates at optimum levels will pay off.
- Liquid/UAN
Values remain available for UAN and NPK solutions and offer good value in the current market. Please speak to your local Frontier contact for more information.
- PK/NPKs
As indicated in previous editions of Frontrunner, potash was firming and there has been a jump of £10 to £15 on offered values. Phosphates values, however, remain soft but stable and these values now offer an ideal time to buy given that applications to cropping are imminent.
Stocks remain tight but, given that the market could have 30 to 35% of complex and straight products still to buy, lead times going forward could be lengthy. Last year's spring market had lead times of three to six weeks depending on the grades required. This year could be longer - it is on this premise that all growers should plan and place orders to avoid late applications and ultimately disappointment.
Get in touch
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