Grain markets have continued to see volatile trading and early in the week US wheat futures rallied following the first 2022 national crop condition and progress report from the United States Department of Agriculture (USDA). Winter wheat crops are in a particularly poor condition, with ratings as bad as they have ever been at this time of year, with the exception of the 1996 crop. Crops have suffered from prolonged dry conditions, expanding drought and storms in December.

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WHEAT

• US winter wheat in poor shape

Grain markets have continued to see volatile trading and early in the week US wheat futures rallied following the first 2022 national crop condition and progress report from the United States Department of Agriculture (USDA). Winter wheat crops are in a particularly poor condition, with ratings as bad as they have ever been at this time of year, with the exception of the 1996 crop. Crops have suffered from prolonged dry conditions, expanding drought and storms in December. The extraordinarily high winds exposed roots and further damaged crops. Only 30% of the US national crop is seen as good/excellent; this is well below average trade estimates of 40% and significantly lower than last year's figure of 53%. Only 7% of the crop is rated good/excellent in Texas. Over a third of the US crop is seen as poor/very poor. Last week, the USDA said the US winter wheat area is 636,000 acres up on last year, but the poor crop condition could see yields fall by a third. Meanwhile, 2% of the national corn crop has been drilled, in line with trade expectations. Markets were also higher due to the news that China had bought over one million tonnes of US corn; this is its biggest single daily purchase since last May. The purchase was split at a ratio of 676,000 tonnes of old crop to 408,000 tonnes of new crop.

• Upbeat EU wheat production estimates

European wheat futures continued to rise this week, with both the Paris and London markets setting new contract highs. There are mixed views on whether Ukrainian farmers will have the ability to bring winter wheat crops to harvest and plant spring crops, but the destruction of infrastructure along with damaged and closed port facilities put a huge question mark over shipping capability - even if there was a prompt end to the conflict. With the conflict seeming increasingly likely to continue, the world's major wheat importers - which would normally source their supplies from harvest from the Black Sea - will most likely turn to the EU for their wheat.

This dynamic is driving prices for European new crop wheat higher. There was encouraging data from the EU commission this week, as it increased its 2022 EU wheat production estimate up to 131.3 million tonnes; this compares to 130 million tonnes in 2021. The commission believe the production increase will provide an exportable wheat surplus of 40 million tonnes, up from 33 million tonnes in the current season. In contrast, last month, analyst group Stratégie Grains put 2022 EU wheat production at 126.9 million tonnes and exports at just 29.8 million tonnes. Winter wheat crops across western Europe are developing well, especially in France. The French crop continues to maintain a 92% good/excellent rating. This compares to 87% last year.

BARLEY

• Feed barley markets

This week, there has been a narrowing of the gap between feed barley in the north and south of England, as higher bids into ports in the southwest push up values in that region. This is due to recent export interest for the next month into Ireland. Further north, buyers of barley into compound mills continue to be primarily for pig rations. Demand into the northwest should tail off as cattle are turned out onto grass. Supply of feed barley from farm is very limited and values generally remain firm. In Scotland, markets are few and far between, but the understanding is that supplies in the country are very tight. Any significant buying interest in Scotland will be difficult to cover and could lead to a firming of values in the short term.

While limited supply of feed barley would suggest values should firm, in many parts of the country barley values are now above wheat. This should lead to a drop in demand, as wheat will be seen as a better value feed option.

• Malting barley markets

Old crop malting markets remain almost non-existent, as focus remains firmly on feed demand. New crop malting barley buyers are present at the moment, but with the lack of first-hand sellers reported, trades are few. Focus for the next few weeks will be firmly on the European spring barley crops and their development. With the lack of sellers, premiums for new crop malting barley remain healthy, but are likely to come under pressure if spring weather is good and sellers finally return.

​OILSEED RAPE

• More traditional factors start to weigh in on oilseeds prices.

Throughout this week, further factors have become drivers in a market in which the Ukraine-Russia conflict has been the dominant factor at play. At the time of writing, UK ex farm values are up for both old and new crop, with new crop the standout performer - up around £20/t. There are also a number of factors supporting values such as the concern after recent frosts in Europe, which may have damaged oilseed rape crops. The damage is yet to be quantified but the impact will be negative. Growers will now be hoping to see a return to warmer conditions in the near future.

Canadian soil moisture presents a slight concern for developing oilseed rape. Although not bullish at this stage, it is a situation to be monitored. According to the Oil World publication, EU consumption of rapeseed oil for biodiesel production has increased further to a four-year high of roughly 5.7 million tonnes in January/December 2022; this is on top of increased usage in the food sector. To contrast these potentially bullish factors, China is coming back into focus, after the country returned from a four day weekend earlier in the week. Heavy buying of US soybeans was expected but didn't occur due to Covid-19 lockdowns sweeping the country and reducing demand for many products. There is still the looming threat of the EU imposing changes to the biofuel mandates, which would hit around 60% of rapeseed demand in the EU. Any significant change in mandates and inclusion rates would shock old and new crop markets due to the huge demand usually seen from this sector.

The Russia-Ukraine conflict is still the biggest driver in oilseeds markets, but as with the Covid-19 pandemic, it is very difficult to gauge the impact and the market will move in response to news reports. Seaports are not an option for exports from Ukraine, therefore the country is relying on rail and road freight. It is very difficult to determine what total volume of grains/oilseeds can be successfully exported via these routes. Estimates range from 300,000 tonnes to one million tonne per month. Even at one million tonne per month, which seems unlikely, the country cannot export anywhere near normal volumes of product. Reports on plantings in Ukraine have been relatively optimistic, however even for regions which aren't in direct conflict, there is severe difficulty getting fertilisers, fuels and other required product for plantings. It is impossible to predict what happens from here, but the effects will be complicated and long-lasting for vegetable oil markets. 

 PULSES

• Demand for old crop beans dropping off

Demand for old crop beans continues to wane, as UK consumers get their summer runs covered. There are still a few opportunities for export, but buyers are only wanting July and August shipment and most long holders will not wait that long. New crop beans are seeing little trade and, whilst the crops of winter and spring sown beans look in excellent condition, it's a long way to go until harvest and growers remain cautious about the final outcome of the crop.

• No demand for old crop peas

Old crop peas remain the poor cousin to beans, as there is simply no demand from the micronisers and there has never really been a market for feed peas in the UK. Last week, one cargo of feed peas traded, which is likely being used to replace cargos of Russian peas that are unable to be shipped. Values for all peas are now trading at a discount to beans of £20-30/t and values look unlikely to recover.

 FERTILISER

• Nitrogen

Domestically, nitrogen values for April delivery have softened following a price reduction in France on 33.5% AN as a result of renewed stability in raw materials and European gas prices settling down. UK gas prices remain relatively stable, and at the time of writing, the price is £2.37p/therm. Despite this, there is still little uptake of purchasing as farmers assess their outstanding requirements for this year's crop.

The global demand for granular urea has slowed, which also leads to softening of prices, although this is not reflected in domestic pricing as suppliers are fulfilling their order books at previous pricing levels.

• UAN/liquid nitrogen

Nationally, there are good levels of new business coming in for application on crops that have good potential. Suppliers have product available, but all offers are still strictly POA. The suppliers have reiterated that once current UK stock levels have been sold, further shipments won't be available until there's a new season market.

Foliar nitrogen products for cereals and oilseed rape are now being offered, as growers look to finalise their application programmes and maximise the crop output. Foliar nitrogen on oilseed rape in the form of 'Oilseed Extra' has been particularly successful over a number of years, showing a yield increase of up to 0.52 tonnes per hectare in Frontier trials.

Limus® Clear, the BASF urease inhibitor is available nationally. As the weather warms up through April and May, Limus® Clear can be a beneficial addition alongside UAN applications to further the efficiency of a liquid-based system.

• Phosphates and potash

Since seeing an increase in potash prices last week, there have been no further changes due to low demand in the UK. However, demand from South America remains strong due to the lack of supply from Russia and Belarus. South America is subsequently looking to source from different regions, which is underpinning current prices and is expected to help them firm further. Phosphates remain firm and this is the result of expected purchases from India and South America.

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