Frontrunner - 8th February 2024

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WHEAT

• Wheat markets continue their slide

By midweek, European wheat markets established new contract lows and extended their 2024 price decline.

Slow demand, uninterrupted wheat exports from the Black Sea and no tangible weather issues has seen London wheat futures shed £25/t in value since the end of 2023. There seems little in sight at this stage to arrest the current trend.

Despite the slide in prices, the UK remains uncompetitive to export any of its feed wheat and is likely to see a record low export total this season. Even in 2020 when the UK wheat crop reached only nine million tonnes, UK wheat exports reached 200,000 tonnes. To date this season, the UK has shipped less than 130,000 tonnes.

Uncertainty over 2024 wheat production and a perceived shortfall in supply has seen 2024 crop prices trade to a premium. Reflecting this concern, this week November 2024 prices climbed to £18/t over the May '24 position. It remains to be seen if UK farmers have the appetite to carryover their wheat or will liquidate stock before harvest.

With current market dynamics, ex-farm feed wheat would probably need to fall to £150/t to generate export sales - the pre-Christmas figure of £180/t might just about be achievable. In contrast, UK farmers who have stuck with producing bread making wheat varieties are enjoying the benefit as premiums climb above £70/t.

• Mixed fortunes for exporters

US weekly wheat export inspections had a fourth consecutive poor week and have been leaning on the Chicago Board of Trade (CBOT) market. Last week's number of 226,269 tonnes takes cumulative exports to 11.274 million tonnes, which is just over 57% of the total United States Department of Agriculture (USDA) estimate but 18% down compared to last year.

On the other hand, the Ukrainian Black Sea export pace has continued to pick up. In January, exports were over five million tonnes and therefore ahead of Russian shipments, ahead of last year and now approaching pre-conflict levels.

Analysts see January Russian grain exports at 4.6 million tonnes - up from 4.4 million tonnes in December. 3.6 million tonnes of that is wheat which is up from 3.7 million tonnes in December.

Last week, there were conversations about renewed interest from China for French wheat. This appears to have had no outcome and it's thought Argentina might benefit from the next purchases China makes.

BARLEY

• Feed barley prices fall again

Feed barley markets have been quiet this week, with a notable drop in farmer selling on both old and new crop.

Throughout December and January, farmers were strong sellers of feed barley as many looked to move on old crop sales in particular. However, with values now dropping to £135–£138/t ex-farm in East Anglia and £150/t ex-farm in the north of the country, the appetite to keep selling has waned.

There has been demand from Ireland and Spain for UK barley, with some trade being reported and the UK is closer to connecting on exports than it has been for months. What will determine the next move in direction will depend on farmers' willingness to accept these old crop levels or whether the depth of export demand from Ireland and Spain is enough to give this market a floor.

Domestically, feed compounders have good coverage on the books for old crop, but little has been covered for crop '24. Barley is trading at around a £25/t discount to wheat on old and new crop, so it does look attractive when compounders are pricing feed rations and we may see some more new crop pricing as we move towards the spring.

Spring plantings have started in some areas, although heavy rainfall in the South of England at the start of this week will prevent any more in the short term. January rainfall was in line with averages which did result in some winter wheat plantings, meaning less spring cropping acreage.

The UK is still expecting a much larger spring barley area year on year. Malting barley markets have also come under pressure, with buyers well covered on old crop and premiums still high given the fall in feed values over the week. 

OILSEED RAPE

• Rapeseed prices fall as crushers fill demand requirements

Rapeseed prices have deteriorated over the last week, as the European crushers managed to find domestic sellers of rapeseed at levels seen in previous weeks.

UK ex-farm prices are now a distance away from many growers' target levels. Margins in the rapeseed complex are squeezed at the moment, with oil struggling to find extra demand despite being the cheapest product among competing vegetable oils.

In other relevant markets, slowing demand for vegetable oils has also led to a set-back in prices. Soybean futures have traded at a seven-month low this week due to lower demand levels from China, as well as the US biofuels market combined with improving weather conditions in South America.

For oilseeds values to change trajectory, there will need to be either a fundamental change in medium-term demand or renewed issues with crops somewhere around the world.

 PULSES

UK old crop bean values continue to slide as a lack of spot demand and more farm parcels are now becoming available. We expect to see support for the later summer months but in the meantime, it's likely there will be further price erosion.

In Australia, the shipment of beans to Egypt is well underway. Throughout January, four vessels hadloaded and sailed amounting to nearly 100,000 tonnes and more shipments are planned for February. Interestingly, the bulk vessels are still travelling through the Strait of Hormouz to the Red Sea with an increased insurance premium, but the container lines are all travelling around the Horn of Africa, adding well over $50/t to the cost of the beans.

New crop bean markets are yet to materialise due to the uncertainty of the planted area and yield likely to be achieved. We're aware that some winter beans are still being drilled and following advice from the Processors and Growers Research Organisation (PGRO) regarding seed rates and expected yield reductions, this is still a viable option.

With many growers still uncertain over the spring planting area, new crop pulse markets will not really trade until we have some certainty. 

 FERTILISER

• Urea/AN

Urea has continued to trade across the globe, with no major price gains reported. However, traded levels are still below production cost, so further increases would appear likely.

With one large European urea manufacturer considering restarting production in the coming months, it would indicate either that demand is now exceeding supply or manufacturers are justifying the cost of production into the European market.

The European ammonium nitrate market is showing signs of the expected tightness on supply, as buyers who delayed purchasing are relying on immediate delivery. You may need to consider alternative nitrogen sources for early applications if you don't have anything physically in stock.

• Liquid UAN

There are no changes to report in the liquid market at present. However, given the commentary about requirement of immediate delivery, those that have the ability to switch between liquid and solid are in a strong position with product supply and options.

• PKs/straights

PK fertiliser buying has continued, which is likely due to ground conditions improving in some areas and growers looking to apply PKs ahead of their main nitrogen and sulphur applications.

You should ensure you're planning P and K applications or have soil analyses to demonstrate they are not needed. Trial work by Frontier's technical crop production teams has shown that fresh PK application in the spring can provide significant yield increases and improve the margin over input cost. When looking at the cost of inputs, P and K values today are at or below the five-year average.

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