Frost risk remains for Black Sea crops: Grain market daily

• Concern over Black Sea tensions again pushed up global wheat prices yesterday. May-22 UK feed wheat futures rose £3.75/t to £222.00/t. The Nov-22 contract rose £2.55/t to £199.55/t, its highest price since 23 December 2021.
• Paris rapeseed futures fell yesterday under pressure from lower crude oil prices and a fall in soyabean prices. The May-22 contract lost €30.25/t to €667.25/t (approx. £560/t), the Nov-22 contract fell €9.75/t to €594.75/t (approx. £499/t).
• Improved weather means the Brazilian soyabean harvest reached 5% complete by 20 January (AgRural). This is up from 0.7% a week earlier. Yields are so far described as ‘satisfactory’ in the top producing state of Mato Grosso, but low yields are being seen further south (Refintiv).
• Wheat crops in Texas have deteriorated since late-November. As at 23 January, 71% of the crop was rated ‘poor’ or ‘very poor’, up from 45% on the 28 November. A year ago, just 41% of the crop was ‘poor’ or ‘very poor’ (USDA).

A relatively mild winter continues to be kind to winter crops across Europe and the Black Sea. But, this also continues to leave crops more exposed to frost damage if temperatures drop. These are some of the key points of the latest EU crop monitoring (MARS) report, out yesterday.

Mild weather through December allowed some crops that were behind at the start of winter to catch up. Most winter crops are now described as in a ‘fair to good (or very good) condition’. This reads like an improvement from the December report, which said crops were off to a ‘fair start’.

Encouragingly, the report suggests that little frost damage has occurred so far. Yet, crops in the Black Sea region remain at risk from frost damage, if temperatures suddenly fall. Refinitiv suggests below normal temperatures this week in parts of Russia and Ukraine, before warming up again.

A good start for winter crops supports the potential for production to rebound in 2022/23. Strong European and Black Sea wheat, barley and rapeseed crops could mean global supplies are more comfortable than this season. This is part of the reason we currently feel the market outlook is slightly bearish when looking six months ahead. It’s also part of why new crop (Nov-22) UK feed wheat futures are £22.45/t below old crop (May-22) prices.

But, frost damage could dent the potential for a strong production rebound in 2022/23. If frost damage happens, it could mean more support for new crop prices, especially relative to old crop prices.

Dry weather in North Africa

The MARS report also highlights that drought is persisting in Morocco, negatively impacting winter crops. In addition, rain is ‘imminently needed’ in Algeria to maintain crop growth. There’s still time for crops to recover ahead of harvest beginning in April, but it’s not an ideal start. Lower production in the region can mean higher import requirements. The UK often exports barley to the region, with shipments to Morocco so far this season (Jul-Nov) totalling 68Kt.

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