Frontrunner - 9th December 2022

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WHEAT

WHEAT

• Markets stabilise ahead of USDA Report

European and US wheat futures prices have continued to fall this week. US Chicago Board of Trade (CBOT) wheat futures fell to their lowest since the end of September 2021 and Paris wheat futures to their lowest since March 2022.

Futures prices have come under pressure as a result of Russia capturing an increasingly large share of the global export market. Last week, several of the world's largest wheat importers secured supplies from Russia, including Algeria, Egypt and Pakistan. Together, they imported almost two million tonnes of Russian wheat.

Russia is now shipping over one million tonnes of wheat each week and is estimated to have shipped 4.5 million tonnes last month. TheBlack Sea export corridor agreement continues, although inspection issues saw November wheat exports from Ukraine fall to 1.58 million tonnes; down from 1.98 million tonnes in October. This takes the season total to 6.9 million tonnes.

Losses were compounded by crop production estimates from the Australian Bureau of Agricultural and Resource Economics (ABARES) which now predicts a record wheat crop of 36.6 million tonnes for Australia, despite the extensive flooding that has been prevalent in the eastern region for several weeks.

Mid-week, the continued fall in futures prices halted and markets made a small recovery. Speculative funds have built significant short positions and some profit taking took futures £5/t up from their lows. However, the market is mindful of the potential for bullish surprises in today's United States Department of Agriculture's (USDA) World Supply and Demand Estimates (WASDE) report.

• Not all bearish news

One of the key bullish market fundamentals is the fast pace of EU wheat exports. At one point, the EU wheat and corn harvests were respectively four million tonnes and 20 million tonnes as a result of the spring and summer drought. Private estimates suggest that the EU has now shipped 16 million tonnes of wheat with seven months of the season remaining. This is half of its surplus already exported, which iswell ahead of the pace of recent years.

Argentina continues to suffer drought conditions, which will see this season's wheat output fall below 12 million tonnes. There are increasing concerns for the country's maize output, which could fall below 50 million tonnes. This would be well below the USDA estimate of 55 million tonnes.

• Mixed new crop prospects

EU 2023 wheat production prospects are encouraging and winter drilled crops generally look well. French winter wheat is seen at 98% rated 'good/excellent' heading into the winter. This is a notable contrast to US winter wheat, where 74% of the area is in drought and 46% of the crop in primary winter wheat producing state, Kansas, is seen as 'poor/very poor'. There are also concerns for some areas of Russia where a ten-day period of extreme cold may have damaged exposed wheat crops that lack snow cover.

BARLEY

• Feed barley trade stalled

A lack of buying interest is currently affecting both domestic and export feed barley markets. Buying activity has been suppressed due to livestock numbers that have fallen as a result of poor margins on EU pig meat and UK eggs, a larger volume of homegrown forage grain on UK ruminant farms and large volumes of grain that continue to be loaded out of Black Sea ports.

Theoretically, there is still plenty of cover to take for February onwards by compounders and livestock producers, but they will not buy until they are sure of the volumes required. Additionally, feed barley is not very competitively priced against wheat.

• Malting barley prices fall as maltsters retreat

As crop 2022 coverage reaches over 90% in most parts of the EU, buyer activity has slowed down significantly. A decline in buying activity is not particularly unusual but the trend of the last two seasons has been for the decline to happen in late February. Maltsters will require top-ups at this time, but many will wait to see brewer demand before committing to purchasing the last 5-10% of their requirements due to demand uncertainty for the 22/23 crop year.

New crop prices are showing a similar pattern of falling lower. Malting premiums are historically high as farmers and cooperatives become more risk-averse and are selling forward. However, the trade sees this as a selling opportunity. The Agriculture and Horticulture Development Board's (AHDB) Early Bird Survey has predicted a lower spring barley area in England and a return to more average yields and pass rates in the EU.

With fertiliser less available and more costly, and with malting barley at relatively high forward premiums over feed spring barley, planting malting barley is an attractive proposition for any land not yet committed.

Your Frontier farm trader can offer a range of marketing options once decisions have been made on final spring cropping.

OILSEED RAPE

• European rapeseed market battles with diverging fundamentals in wider complex

This week movements in domestic rapeseed prices were relatively reserved, whilst elsewhere in the oilseed complex price movements have been sharp and directional. In the soybean market, the news of China easing some of its Covid-19 restrictions following protests gave the market confidence that there would be a significant demand increase and subsequent price rises. In combination with this, conditions in Argentina for planting soybeans are not getting any better, with the country seeing its worst statistical drought for 50 years.

Canadian canola gained significant strength on the back of an estimate from government agency, StatsCan, which sees the Canadian crop at 18.1 million tonnes. This compares to the market prediction of over 19 million tonnes. The estimate strengthened canola prices in the Canadian market but did not filter through to European prices, which remain virtually unchanged on the week as the market wrestles with a plentiful supply situation from domestic and Australian origins.

• Rapeseed in plentiful supply

Rapeseed production has exceeded early estimates, which means the market could see some decline in prices in the months ahead. Prices are currently equal to those seen in January 2022 at a time when the old crop supply looked tight.

 FERTILISER

• AN/urea

It has been another quiet week with very little market activity on ammonium nitrate (AN) and urea. Talk has now turned to market requirements for January to March 2023 and the potential shortfall of available supplies due to market inactivity in September to December 2022. Many suppliers and producers are trying to make sense of the potential volumes required and the limited time available to make and distribute to the market before the application window opens in eight to ten weeks. As expected, the gas price has firmed across Europe and the UK as colder weather sets in.

Conversations continue around the production of nitrate and how it has once again become uneconomical to produce. As a result, the market is seeing a decline in the tonnage available, including in the UK.

India may come back to the market for more urea pre-Christmas but has not yet cited its requirements. Prices remained flat for the past week with only limited trade.

• Liquid

With cropping areas now finalised, growers are encouraged to review their requirements for spring 2023, taking into account tank fill tonnes already delivered. If there are changes in requirements - perhaps due to an increase in winter cereal drilling - a full portfolio for nitrogen and nitrogen sulphur grades is presently available for those needing to secure additional product. All growers are encouraged to include Limus® Clear, a urease inhibitor, for inclusion within UAN applications throughout their liquid fertiliser programme in the spring. The benefits include an improved nitrogen use efficiency (NUE) of up to 7% through reducing ammonia emissions by up to 98%.

• PKs/NPKs

Some low levels of trade have taken place again this week but market activity has otherwise been very limited. Suppliers are well aware of the supply chain issues ahead but, with low demand, sheds remain full with no option to buy fresh supplies. The challenge for blenders will be actual product replacement once spring demand returns. MOP/TSP and DAP are in demand, with buyers globally trying to fulfil their requirements before usage in March/April.

With few AN offers being available, growers may need to turn to other nutrient mixes. Growers are advised to check their nutrient content and spring blends now.

Get in touch

Please speak to your local Frontier contact or email us at This email address is being protected from spambots. You need JavaScript enabled to view it. for more information or advice related to any of the topics and services mentioned in this report.