Frontrunner - 21st March 2024

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WHEAT

• Higher wheat prices

Speculative fund short covering has driven wheat futures higher in recent days, led primarily by gains in the Paris market. The May 2024 contract breached €200/t on Tuesday which was the market's highest level since 27^th February 2024.

The funds had built record short positions in the Paris wheat market but improved physical wheat demand, Black Sea supply concerns and EU political moves have been the catalysts to trigger a need to reduce the exposure to potentially higher prices.

The EU failed to publish its weekly update on EU wheat export sales, but progress has been brisk of late and catching up on last year's pace.

There's a strong vessel line up in France, with numerous vessels loading for China throughout this month which highlights physical price support. There were misreports of cancellations by The French Ministry of Agriculture and Food last week which didn't materialise. However, China's wheat imports in general for first two months of the year are put at 2.5 million tonnes by customs, which is 17% down on last year.

• 2024 reality dawns

The UK 2024 wheat price premium over old crop prices has widened further, with November '24 prices now over £20/t higher than May 2024.

The Agricultural and Horticulture Development Board (AHDB) published the results of its revised early bird survey for March. It cut 260,000 hectares from estimates farmers made for the 2023 harvest, putting the UK wheat area at only 1.463 million hectares.

This is a result of persistent rainfall and waterlogged fields hampering normal drilling practice, and what is drilled isn't satisfactory.

Over the past 15 years, the UK wheat yield has ranged from seven to nine tonnes per hectare, suggesting the high end of this range would produce a wheat crop of 13 million tonnes, the lower end could potentially be just 10 million tonnes. Given the poor condition for many winter wheat crops, a yield towards the lower end seems entirely possible. 

BARLEY

• Low prices slowing supply

Feed barley trades have been slow this week. Farm selling of old crop has continued at a subdued pace, with supply coming forward only where the need for cash or storage outweighs the want for higher prices.

Lack of supply is supporting old crop prices, however, compounders bought barley at the end of February/start of March so are not motivated to bid up the prices now.

Old crop feed exports are still materially behind previous years which is further adding to the bearish price dynamic.

Malting barley prices have held onto last week's gains. With a much busier export schedule throughout this season in comparison to feed, there is not the same weighty supply nationally.

• Weather watch on new crop

It is still too early to tell how the winter barley that was planted is fairing, but preliminary reports show a mixed picture nationally.

Spring barley planting is progressing more in the southwest than any other region, with some pockets of progress on lighter land elsewhere in England.

We are still well within the planting window so it's not too late for more crops to go in. Weather, particularly UK rainfall, is a key watch point for the rest of March onwards to try and get a clearer picture of new crop malting barley quality. 

OILSEED RAPE

• Rapeseed values continued to improve after a combination of factors

The current short position that funds hold in MATIF rapeseed is rapidly deteriorating, as trade shorts look to buy back into the market and exit their positions.

Additionally, there were recent rumours of the EU applying 50% import taxes on Russian oilseeds and its products, which would be supportive of end product prices.

The final main factor for recent price increases is a wave of crusher buying, partly driven by biodiesel producers for the summer.

The question now for old crop rapeseed prices is: how much old crop remains unsold versus how much demand the crusher has left? Currently, this favours the crusher as there remains a considerable carryover for the market to deal with.

In other oilseeds markets, price movements are much more subdued with supply and demand pictures developing - rapeseed was by far the best performer on the week.

 PULSES

• Old crop remains in a limited trading range with minimal price movement

Farm supplies are drying up, but this is equally matched with a nearby reduction in demand as compounders are unable to take all the tonnage they have bought and are asking for a carry to roll the contracts through to the summer months.

New crop markets are even more challenging because without clear information of winter bean planting and still very few spring beans sown, the usual European shippers are reluctant to make a move and there are zero new crop beans offered.

 FERTILISER

• Urea/AN

Global urea trading continues with varying cargo sizes, mostly for April/May arrival into destined countries. Generally, there are no major pricing changes to report within urea.

Latest production statistics from India have shown that the country's recent monthly production is significantly down in comparison to its average. This is being caused by production turnarounds happening in what is usually 'off season' for them. India has also announced a purchasing tender of 600,000 to 700,000 tonnes for April/May - we will know confirmed offers by end of March.

There's very little to report for AN markets. Whilst Europe remains in the same weather pattern as the UK, growers continue to operate in hand to mouth. Many will be watching the impacts this behaviour will have on the supply and demand of physical product, as well as transport logistics during April and May.

• UAN/Liquid

Markets remain static on pricing and have done since January 2024. This provides a positive opportunity for growers to assess crop potential before purchasing final application volume.

Suppliers have started to see requests for additional product, for either second application and/or top up volumes. This is coinciding with NPK liquid demand, especially as the potato and maize area is confirmed. Potato ground preparation/planting has commenced in some, albeit limited geographies.

• Straights/PKs

Due to physical stock and replacement levels, phosphate prices continue to firm. Although we are not seeing a rise in the UK, suppliers are significantly firmer on price offers onto farm.

Potassium appears to be showing a geographical split, where importers are bidding for the same business. This gives the impression of market weakness, whereas in reality it is internal market competition.

Popularity of grain and forage maize continues to increase and is being seen as a significant UK crop, so DAP and similar product demand is growing. These requirements are usually lower in volume so it's worth considering the timescales on delivery for usage and a good idea to have this conversation now.

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