Frontrunner - 8th June 2018

WHEAT 

• Weather and tariff talks in the USA​

Global weather models continue to underpin new crop wheat prices and despite very little change over the past seven days, widespread dryness remains the theme in the USA and the Black Sea.

Chicago wheat futures were among a host of agricultural commodity markets that began the week with sharp losses fuelled by the ongoing trade-talks between the USA and China. This remains a key watch point for US export figures going forward. Since then, trade focus has returned to weather forecasts elsewhere and despite a wetter outlook for Australia and Russia, futures look set to finish the week firmer.

The US winter harvest is now 5% complete which is in line with the average, although slightly behind last year's pace of 9% complete. It is too early at this stage to present any meaningful yield data, although crop ratings continue to be revised down and now sit at just 37% good/excellent. Spring wheat could be the saving grace for total US production with a current rating of 70% good/excellent (against last year's 55%), having missed the hot and dry weather at the turn of the year.

• London futures hit new highs
  

November LIFFE wheat futures climbed to new contract highs of £162.65 on Thursday, mirroring the pattern of US and French markets. In addition, strong domestic demand for both old and new crop wheat has translated into firmer ex farm prices over the week. Crop development will be monitored closely over the next few weeks, but the latest figures have already dropped the average yield below 8.2t/ha as a result of the recent dry conditions.

The tighter supply and demand outlook is reflected in current prices and growers in most areas of the country are now comfortably able to forward sell wheat above the cost of production.Please speak to your frontier farm trader for all old and new crop marketing options.

BARLEY

• Harvest feed barley price rises slowly – later months up more
  

While forward feed barley prices have moved in line with wheat futures – albeit not one for one – values for 'off the combine' collection have lagged behind. This is due to the fact that Spain and Portugal have had the opposite of last year's weather, i.e. regular rainfall and below average temperatures. There is talk of a Spanish crop of 8.8 million tonnes, compared with last year's poor crop of 5.6 million tonnes. That is a 57% increase and a massive swing, which has meant limited interest from our main harvest buyers. However, once out of the harvest position feed barley prices are held up by our domestic wheat prices, particularly in the western and northern areas as compounders respond to livestock producer's ration purchases by buying wheat and barley.

• Scandinavian cereals struggling for moisture
  

Denmark has had its driest May in a year, while Sweden has had its hottest. This is impacting the yield and quality potential of their barley. They have planted an area that was 30% larger than the previous year's due to being unable to sow all the cereals and oilseed rape they wished to in the autumn.

However, this area may only produce a crop of the same size as last year and most likely not of the same quality. This is definitely not what the market expected five-six weeks ago, hence why malting barley prices have climbed as fast (if not faster) than the general cereal market.

• Large US maize crop holds back feed barley
  

Maize values have fallen 5% over the last two weeks as US drilling came to completion in good conditions. If all goes well, world feed grain prices will struggle to rise. Currently, it is holding back feed barley prices on the export market for the autumn and the UK has to export some 500,000 tonnes sometime this season. Today, UK exports look like they are getting off to a slow start.

​OILSEED RAPE

• Prices drifting
  

European rapeseed prices have drifted lower this week on a combination of world trade woes and better weather in some key production areas. Further downside potential in the short term feels limited, with slow farm selling and continued dryness reported in Australia but traders are very much on weather watch at this time of year.

• Trade tensions persist
  

Discussions earlier this week failed to ease US-China tensions, with the US set to impose tariffs on $50 billion of Chinese industrial US-bound exports on June 15^th. The expectation is that China will retaliate with tariffs on a range of agricultural products, which will have a depressing effect on soybean markets in particular.

• World crops improving
  

Just as export markets for US beans turn difficult, their crop prospects are soaring. Plantings are running ahead of average and crop condition, at 75% 'good to excellent', is the best at this stage since 2010. Canada is benefiting from much needed precipitation and forecasts are predicting rain in the Black Sea regions next week, while the markets will continue to focus on global weather events. In the meantime, Oilworld are predicting a 9% increase in 2018 UK rapeseed production to 610,000 hectares.

PULSES

• New crop values strengthen
  

Stronger wheat markets this week have helped drive up new crop bean values, with growers selling into the rally. Until harvest, the market will continue to follow wheat trends but will disconnect when we know more about UK and Baltic yield and quality.

• Good progress for spring bean crops
  

The weather across most of the UK has been perfect for the late drilled spring bean crops, which are now just beginning to flower having only been in the ground for around six weeks. The challenge for the crop and growers now is to be vigilant and watch out for chocolate spot. This is showing in winter beans alongside infestations of black bean aphid that can decimate a crop very quickly.

FERTILISER

• New season AN market started today
  

CF today released a limited tonnage to the market of Nitram, Single Top and Double Top for delivery in June. By the end of the day terms have been withdrawn and we expect to see the market restart on Monday morning. For more information, please speak to your Frontier contact.