Wheat futures rallied through the Christmas holiday, driven higher by speculative short covering. The weakening Euro in foreign exchange markets, coupled with concerns for future Russian export volumes and their new crop production potential, drove the Paris market to its highest since 18th October last year. Subsequently, a lack of fresh export business and poor EU wheat export sales have galvanised selling interest and prices have eased.

WHEAT

• Market loses its festive bounce

Wheat futures rallied through the Christmas holiday, driven higher by speculative short covering. The weakening Euro in foreign exchange markets, coupled with concerns for future Russian export volumes and their new crop production potential, drove the Paris market to its highest since 18^th October last year. Subsequently, a lack of fresh export business and poor EU wheat export sales have galvanised selling interest and prices have eased.

Official EU wheat export figures from Brussels, up to the 5^th January, showed an increase of 629,000 tonnes on earlier reports. This takes the seasons cumulative total to 11.16 million tonnes - 5.73 million tonnes behind last year. In December, analysts Strategie Grains cut its EU wheat export estimate to 23.8 million tonnes, which would still leave EU wheat end stocks 2 million tonnes lower than the carry in, at 11.8 million tonnes. As the data is incomplete, a more optimistic view may be that with half the year gone around half the EU surplus has been shipped. With Russia scaling back its export pace, with a quota for 10.8 million tonnes in place from February to June 2025, shifting the other half of the surplus over the next six months shouldn't be an issue.

Weekly EU shipments will be a key element moving forward, helped by the firm US dollar / weak euro. The firm US dollar helped the Chicago Board of Trade (CBOT) wheat market drop to new contract lows on the second trading day of the new year.

• US wheat condition slips

The United States Department of Agriculture (USDA) updated its winter wheat monthly crop condition updates this week, which showed a marked drop for some of the major states. Primary producer Kansas dropped from 55% 'good / excellent' in November to 47%, although this is still ahead of 43% at this stage last year. Nebraska showed a more marked drop from 49% to 27% 'good / excellent' and Oklahoma from 48% to 45%.

Much of the winter wheat belt is now under snow and protected from further deterioration due to winter kill, but the near record good condition that the crop was in going into winter has clearly changed and needs watching.

Later this week the USDA will publish its first estimate for the US winter wheat area for 2025 harvest, with trade estimates approximately one million tonnes either side of last year's total of 33.39 million acres. The USDA will also publish its first December US grains stocks and the January World Agricultural Supply Demands Estimates (WASDE), leaving plenty of scope for surprise and potential price volatility.

• Argentina weather concerns support corn

Whilst CBOT wheat struggles for traction, CBOT corn futures have rallied to their highest since last June, with speculative buyers extending their long position in the market to almost 229,000 contracts.

Dryness and warm temperatures in Argentina are a concern for recently planted corn crops as the drilling continues towards completion. Strong US corn export sales are fuelling the price strength, reaching 61.7% of the USDA US export estimate, well ahead of the average for this time of 53.9%, despite the strength of the US dollar.

A lack of Chinese buying is a concern, but CBOT corn continues to narrow its discount to CBOT wheat to only 80 cents per bushel, the narrowest this season and half the discount it was this time last year. This suggests that corn is too expensive, or wheat is too cheap, but South American corn production potential is a key pricing element for grains.

BARLEY

• Activity picks up after festive break

Farm selling has picked up this week after two quiet trading weeks over Christmas and New Year. Prices for feed barley are largely unchanged compared to where they were pre-Christmas, with farm selling coming from growers who are looking at both spot and forward sales.

After months without any port demand there are now bids into the main ports in the South and South-East of England. The UK is closer to exporting feed barley from these southern areas, to Ireland in particular, preventing barley travelling as far north as it was pre-Christmas.

With many parts of the country experiencing snow and wintry weather over the last few days, demand has picked up domestically, although this has mainly been for January / February. It is forecast that the cold weather will last until the weekend, with temperatures looking warmer next week onwards.

• Malting barley premiums still relatively small

Malting barley premiums have been under pressure since harvest, due to the high quality of barley produced in the UK. With premiums so small, we have seen malting barley move into the feed barley market for growers with storage pressures looking to secure movement. With demand for malting barley lacking, premiums are still small going into the New Year and this sentiment is expected to last for the remainder of the crop year.

• New crop activity yet to kick-off

New crop barley discounts to wheat are much narrower than the discounts seen on old crop due to a lack of any meaningful farm selling. It is likely that the barley area for crop '25 will fall given the fact that the end of October and November allowed farmers in most parts of the UK to plant their intended areas of wheat, which explains the lack of barley selling. However, if the discount to wheat stays too narrow for too long demand will switch out of barley and into other commodities – one to watch over the coming months.

​OILSEED RAPE

​Rapeseed values have been increasingly volatile over the last few weeks whilst simultaneously developing a downwards trend. Since the recent peak in the market around 12^th December, values have dropped by around £30, taking us to a delivered crush level of approximately £430 at the time of writing.

This recent peak in the market was partly driven by a vessel crash on the Moselle River in France which damaged a lock and rendered some of the tender points for MATIF rapeseed inaccessible, this initially caused some panic in markets which was quickly reflected in prices. Subsequently, news of the lock being fixed in time for these tenders helped the market to give back all of that 'panic premium', partly assisted by slow demand for vegetable oils in the nearby months.

In the UK, there is positivity around the condition of crop that is in the ground, however, we will need some superb yields to avoid producing the lowest crop in over 30 years.

Elsewhere globally, traders focus on South American weather conditions for developing soybean crops in both Brazil and Argentina where overall production is set to be relatively large, although the most recent concerns are in Argentina where a hot summer is starting to damage crops. Despite this, it will take a large-scale issue to affect the comfortable upcoming supply picture.

 PULSES

• Feed beans

Thus far, the new year hasn't brought any real changes to the feed bean market. A continued lack of domestic demand coupled with a steady supply means the nearby positions are being filled early.

UK export market values look to be in the correct place, but again there is a lack of demand. Consumers appear to not want to commit to beans for forward months and are buying more so for the nearby. Demand may still come for the first quarter of 2025.

• Human consumption beans

The bean supply from the Baltic appears to have finished, with none being offered in the market. Half of the Australian crop has been marketed, with the bulk of this flowing to Egyptian ports over the next couple of months. Despite this influx, there is still a demand for good quality human consumption beans, so please continue to send samples to your local farm representative.

 FERTILISER

• Urea / AN

A combination of economic and geopolitical forces - led by high natural gas prices - has unfortunately caused tightness on the supply of ammonium nitrate carried over into 2025. With no sign of production catching up to satisfy demand, the availability in Europe (and more so the UK) will be under significant pressure.

Producers across Europe remain exposed to high gas prices, the likes of which have not been seen since October 2023. This is due to Russian pipeline gas deliveries via Ukraine ending on the 31^st December 2024, coupled with high domestic demand due to colder conditions pushing European gas reserves to their lowest in seven years, at circa 70% (was 86% in January 2024). Gas stocks will improve over time, with the switch to using more liquefied natural gas (LNG) out of various global locations. However, this will cause more volatility in pricing, setting an uncertain future for energy costs over the next six months.

This week Yara in Europe issued its January pricing for 33.5%, which was up by €38/t from December 2024. This not only reflects the increase in raw materials (gas /ammonia), but also the $55/t price increase on Egyptian urea markets since the start of the Christmas break.

Due to price expectations being set too low, the recent Indian urea tender only enticed just under 200,000 tonnes (1.5 million tonnes was hoped for). This led to producers walking away from any negotiations or counter offers to focus on regions offering better returns. India will need more volume and will now have to compete with demand from North and South America, as those markets look for supply.

UK production of ammonium nitrate is sold out for January and growers are advised to look at their requirements urgently, as the available volume for February is reducing daily and there is an absence of quality imports. Currently, domestically produced levels look favourable for February and March delivery but will be under constant review due to firm raw material costs and the expected increased demand. The first review will be held on Friday 10^th January.

• Liquid

UAN values are still unchanged despite recent changes in the urea and AN market, although volumes remain limited and terms could be withdrawn in light of increases in replacement values. Growers are advised to review their total requirements for the coming season and discuss any additional requirements with their Frontier representative. Growers have access to a full portfolio of nitrogen and nitrogen sulphur grades for delivery either ahead of usage in January, or on the run in the spring.

• Pks / Straights

Potash markets are seeing a continued, steady demand globally, however any tariffs imposed by the USA on MOP out of Canada after the 20^th January could have an impact on prices, which may radiate around the world.

Phosphate (DAP / TSP) is slightly firmer at the start of 2025 and in general, markets are slow following the holidays. Clarification around physical supply needs to be established before price direction can be confirmed, but due to high energy costs it is not likely to be lower.

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