Frontrunner - 8th August 2024

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WHEAT

• Strong crop ratings keep lid on US prices

Improving production prospects for US wheat and corn has encouraged speculative funds to build near record short positions in Chicago Board of Trade (CBOT) futures, sending markets to contract lows at the end of July. The subsequent weakness in the US dollar – which has enabled US grains to be more competitive in export markets - has allowed for a modest wheat price recovery, but strong crop ratings temper any notable buying enthusiasm.

The US spring wheat condition was unchanged on the week at 74% 'good/excellent', well ahead of last year's figure of 41%. Spring wheat harvest advanced five points on the week to 6% 'complete' – behind the average of 10%. Winter wheat harvest is 88% done, with all the major producing states complete. Corn condition slipped one point on the week to 67% 'good/excellent', but this compares very well to last year's 57%.

US wheat prices are finding support as the winter wheat harvest nears completion, signalling an end to harvest selling pressure. Low US prices are attracting increased business and export sales sit at 42% ahead of last year. Weekly wheat export inspections were at the top end of expectations at 440,888 tonnes, which takes the cumulative total to 3.54 million tonnes - almost 16% ahead of last year's pace.

• International buying lifts wheat prices

Egypt is one of the world's largest wheat importers and prospects for a potentially record-breaking purchase helped rally wheat futures prices mid-week. On Wednesday, Egypt's state grains buyer, General Authority for Supply Commodities (GASC), issued a tender to purchase up to 3.8 million tonnes of wheat, with a deadline of 12^th August set for bid prices. Wheat was sought for each month through to April 2025, with sellers required to accept letters of credit with a 270-day payment. Algeria has also indicated a wish to buy 50,000 tonnes of wheat for October.

With Russian wheat prices for 12.5% protein milling wheat little above their recent low, at $221 FOB (before freight), it seems likely that the worlds primary wheat exporting country will dominate sales to Egypt. Russia's export campaign is off to a poor start this season, with July grain exports at their lowest since last December when they shipped 4.5 million tonnes - including 3.6 million tonnes of wheat - compared to July 2023 when they shipped 5.6 million tonnes of grain.

• Adverse weather impacted on UK and France output

There have been further revisions to the French wheat production estimate as yields continue to fall. Production is now believed to be as low as 25.17 million tonnes, which if realised will be the smallest French wheat crop for 41 years. Average yield is put at 5.944 t/ha, compared with 7.37t/ha last year and almost 19% below the previous five-year average. Over two thirds of the crop was harvested by the end of July.

With the UK wheat harvest over 20% complete, yields are variable and disappointing for most, with testing showing a mixed quality crop so far. Hagberg and specific weights are more than good enough to meet minimum milling specifications, but protein is a scarce resource, with little above 13% and plenty below 12%. The UK miller buys full specification, bread-making wheat based on a minimum 13% protein, but fallbacks allow for delivery down to 12%. Samples below this figure are downgraded but might still achieve a modest premium. Extensive black-grass contamination has added to the challenge of farmers presenting wheat fit for market, with extensive cleaning required to remove admixture that would result in rejection if evident on delivery.

The challenging autumn drilling conditions and prolonged periods of adverse weather through the crop development will leave UK and France wheat potentially 14 million tonnes down, compared to 2023.

BARLEY

• A tentative recovery in prices as harvest pressure subsides

Markets have lifted from last week's lows but remain subdued, advancing over £3/t between Monday's open and Thursday, with the barley discount to wheat remaining stable at £25-30.

The feed barley harvest is all but complete in the UK, with the south of the country over 90% done and northern regions not far behind. The pace of harvest has been good, helped by favourable combining conditions from the middle of July onwards. Quality is also looking good, despite yields being between 5-15% down on last year. Available farm selling has slowed as the week has progressed, as large carries exist from August to November, meaning growers are looking to store more feed barley this year compared to previous harvests.

• Domestic demand for feed barley supports prices

Exports are still well behind the typical pace, but price and carry dynamics this year have resulted in a material reduction in harvest pressure, which is supporting domestic premiums. While this continues it is hard to see how prices will be able to fall in line with Russian and Baltic FOB offers. Demand from feed compounders has been robust with the barley discount where it is - this is another important factor that will help support feed barley prices if sustained.

OILSEED RAPE

• Markets unstable as harvest continues

The largely dry weather across the country in the past week means harvest has continued to progress ahead of last year. Yields are below average at just over three tonnes per hectare.

Rapeseed markets have continued to be highly volatile. The most recent price decline was driven by reports of low crushing margins in Europe and the US. Processors are facing pressure as biofuel producers are using less soybean oil in favour of cheaper alternatives, such as imported used cooking oil. Reports indicating record yields and ample supply of US soybeans is further adding downward pressure on the global oilseed market.

 PULSES

• High premiums stall demand

We have seen bean harvest begin during the past week, with early winter varieties being combined on lighter land. Feed bean values are currently trading around a £40/t premium to London wheat futures. Despite this premium decreasing over the past two weeks, demand remains limited. Most UK feed compounders do not see beans as good value and prefer alternatives like rapeseed meal where possible. Additionally, there has been no export demand as Baltic beans are offered at more than £15/t cheaper. This premium must fall further to increase both domestic and export demand.

The first peas have also been harvested this week with encouraging yields. Large blue peas that are suitable for micronizing are valued at approximately £370 ex farm, while feed peas are valued at similar levels to feed beans.

 FERTILISER

• Urea/AN

The global urea market remains relatively stable - producers have volume to sell and are offering, but demand is low. There is speculation that India may return to the market with another tender in the coming weeks and an increase in the ongoing tensions in the Middle East will be of concern and closely watched going forward. Egyptian production continues, but only at circa 80% capacity.

The leading European benchmark gas price – Dutch TTF Gas - remains firm and the tensions in the Middle East could also disrupt global liquefied natural gas markets, causing further volatility. As mentioned in last week's report, ammonia also remains firm and has increased by over $100 in a matter of weeks. The firmness in gas and low demand is leading to reduced production from European producers on AN.

High ammonia costs are also being felt in the UK, however terms on AN for winter delivery still show good value and don't reflect the true costs considering the rises we are currently seeing.

• UAN

Much like UK AN, UAN values remain unchanged, despite the increases in ammonia pricing seen in recent weeks and the impact this will have on replacement costs for product arriving in the UK in the coming months. Current UAN terms continue to offer growers the opportunity to commit to product in both tank fill and Spring delivery periods at very competitive values when compared against AN and compound N/S systems. A UAN vessel discharged in the North-East in recent days, with additional product expected to be shipped down the coast to an East Anglian port later this month - the arrival of product will see further deliveries onto farm for those with tank capacity.

• Straights/PKs/NPKs

There are no updates to report on the P and K market and potash remains unchanged and flat. Phosphates continue to firm and changes to subsidies in India could further tighten supply, as we may see trade flows change direction into this region.

We have a full portfolio of solid straights, PKs and good quality NPK compounds available, as well as liquid NP and NPK grades. These are available for prompt delivery in both bulk and IBCs for those growers looking to establish OSR in the coming weeks.

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