Frontrunner - 18th November 2022

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WHEAT

• Ukraine export deal extended

This week, wheat markets continued to fall and have seen further losses in value – over £30/t since the beginning of the month.

The primary bearish price driver has been the hope that Russia would extend the grain export corridor agreement in the Black Sea. On Thursday, the UN Secretary-General confirmed the deal would be extended for 120 days.

Ukraine's agricultural ministry has reported that Ukraine has successfully exported 5.7 million tonnes of wheat to date this season and that the extension of the agreement will allow that figure to increase. However, continuing Russian military action in Ukraine raises concern for further damage to Ukrainian infrastructure, including power stations, which may impact export potential.

• EU wheat production estimates increased

Analyst group Stratégie Grains increased its EU wheat production estimate by 100,000 tonnes in its latest monthly update, bringing the new estimated total to 125.6 million tonnes. If realised, this would provide 31.6 million tonnes for export. The group also increased its import estimate by 700,000 tonnes, bringing the new estimated total to 6.1 million tonnes.

Despite fierce competition from Russia and Ukraine, EU wheat exports are continuing to run at a fast pace. Official weekly data from Brussels saw an increase of 828,000 tonnes on the previous week with the total for the season up to 13.350 million tonnes. However, private estimates suggest the official data is underestimating this figure by over 1.1 million tonnes. If this proves true, around 50% of the current wheat surplus may be shipped by the end of this month with seven months of the season remaining.

China is contributing to demand for EU exports, reportedly buying "several" French wheat cargoes this week.

• Argentinian production potential worsens

During 2021-22, Argentina was the world's sixth-largest wheat exporter, shipping 16.25 million tonnes and accounting for 8% of total world trade. However, severe drought will result in significant crop losses this season.

The latest crop estimates from the Buenos Aires Grain Exchange (BAGE) have been revised lower again, from 14 million tonnes to a new figure of 12.4 million tonnes. Similarly, the Rosario Grain Exchange has dropped its estimate from 13.7 million tonnes to 11.8 million tonnes.

Severe drought conditions are also prevailing across North America which raises concerns for 2023 winter wheat potential. Weekly crop conditions were slightly up on the week to 32% rated "good /excellent"; this is historically low and compares to 46% that achieved this rating for the same period last season. The US will account for 10% of world wheat exports this season.

BARLEY

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OILSEED RAPE

• Rapeseed values slide lower amidst increased supply certainty

This week, ex farm rapeseed values for the UK grower have lost around £30/t in a market environment that has lost many of its short-term bullish factors. Notably, Russia has agreed to extend the Black Sea export corridor into the new year which will ensure that all of Ukraine's remaining rapeseed will be exportable in the near future. To date, approximately 75% of its exportable surplus has been shipped.

The market has also seen indicators that China is unlikely to reverse its current zero-Covid policy. The policy has been restricting demand for oilseeds and oilseeds products in China since the start of the pandemic.

Markets have also been sent lower on news of improved conditions and planting forecasts for South American soybeans. However, with planting at only around 12% complete in Argentina, it will be some time before final volumes can be assured.

Meanwhile, extreme rainfall continues in Australia. This will only affect a minority of the crop but may have some impact on logistics. If there is a chance that the seed could take longer to enter the European market as a result, rapeseed prices could gain some underlying strength.

In recent weeks, vegetable oil prices have been very strong, which is mainly due to increased demand and capacity in the biodiesel sectors. However, these prices have weakened in the last two days.

To summarise, market fundamentals – including an oversupply of rapeseed globally – have taken over a market that has been previously swamped by uncertainty and political changes. However, the current volatility of the market could see this change again in a matter of hours.

 PULSES

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 FERTILISER

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