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Market Report

Thursday 27 January 2022

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This week: UK wheat trader Freddie Humfrey talks us through an interesting week for grain markets.

Wheat

  • After a week of risk-on, risk-off trading, the receding threat of a Russian invasion of Ukraine and talk of firmer US monetary policy has seen prices fall sharply over the last few sessions to close virtually unchanged week on week.
  • The fact that Russia’s president Vladimir Putin will attend the opening ceremony of the Chinese Winter Olympics suggests an invasion is not imminent.
  • However, all eyes remain on Russia/Ukraine developments. The US State Department has advised all Americans to evacuate Ukraine, although the EU Embassy remains fully staffed.
  • This may have a big effect on agricultural markets. Russia and Ukraine are large exporters of wheat, sunflower seed, rapeseed and oil, in addition to fuel supplies.
  • Much remains up in the air and it is unclear where the market goes from here.
  • The fundamentals also paint a mixed picture.
  • USDA reported a sharp fall in winter wheat crops ratings in Kansas and Oklahoma, with 31% and 43% of the crop rated poor or very poor respectively.
  • However, Informa estimates the US 2022/23 all-wheat area at 48.4mln acres, compared with 46.7mln this time last year. Winter wheat is put at 34.4mln and spring wheat at 12.7mln.
  • Buenos Aires Grain Exchange reported corn plantings at 88% complete. While recent rains have helped late-lanted corn, BAGE reports that the early sowings have continued to deteriorate.
  • Exports news is similarly mixed. Russian wheat exports had amounted to 23mln t as of 20 January, down 21% year on year.
  • Meanwhile, Algeria’s government seeks to at least equal last season’s harvest by offering higher prices to growers to encourage production, which it hopes will lower imports by 25%.
  • India’s wheat area as of 21 January was reported at about 34.1mln ha, down 1.3% year on year.
  • MARS (EU’s crop monitoring unit) reported that winter crops in Europe have had favourable weather conditions and are generally in fair to good (or very good) condition.
  • EU soft wheat exports had reached 15.6mln t as of 23 January, compared with 15.04mln t this time last year, although the commission said French figures were only complete up to the end of December.

Malting Barley

  • EU malting barley prices are coming under more pressure.
  • Buyers are more relaxed and most are now covered into April/May.
  • New crop prices are also weaker with more sellers coming to the market.
  • Spring planting is continuing on the light land and going into good seed beds for the time of year.

Feed Barley

  • The old crop barley market has shrugged off the volatility witnessed in wider markets this week and remains well bid with very little offered nationwide.
  • Coaster freight rates are easing back after months of prolonged tightness. The UK is once again looking competitive into Ireland, and more so into the Netherlands, as well as a result of the higher MATIF. Old crop markets across the world are now extremely difficult to trade, as the surpluses in major exporting nations dwindle.
  • New crop barley is still quiet and most participants remain risk averse. Barley continues to track wheat at around £15 under on a delivered basis. Export demand is still nowhere to be seen.

Rapeseed

  • Outside markets were mixed this week, with US stocks lower, but crude oil and the US dollar trading higher.
  • CBOT soybeans have been on an upward trend for the last few sessions as concern grows over South American crops.
  • Crops in south Brazil looked very poor. Harvest is estimated to be 6% complete and lower-than expected yields are being reported. One estimate has now put the country’s crop closer to 124 mln t, compared with 139mln t in USDA’s January report.
  • Turning to rapeseed, bigger Australian and Indian crops do take the pressure off in the short term.
  • Canadian canola has been trading below $1000 for most of the week, unable to find support from the wider complex.
  • MATIF rapeseed was much the same, trading in the red before finding a little support in today’s session.
  • Rape oil struggles to buy any further demand and, whilst we may see some support from the South American weather market, rapeseed prices are likely to remain very volatile as we head into month-end.
  • Crude oil prices firmed to $87 on West Texas. After profit taking at the start of the week, Malaysian palm oil futures rallied to new highs once again. News that Indonesia is curbing palm oil exports to help domestic food inflation added support. Soy oil rallied along with support of palm and crude oil, but rapeseed oil has lagged behind.
  • Chinese purchases have slowed ahead of Chinese New Year. The WTO has decided China can impose compensatory tariffs on the US totalling $645mln. It was far less than China wanted, but the US took offence, which may lead to another trade war.
  • Looking ahead, Informa’s latest estimate puts the 2022 US soybean area at 87.8mln acres compared with 87.2mln acres last year.

Oats

  • Oat markets have seen little activity over the last week. Buyers into Europe have largely been absent from placing any bids and domestic UK millers have similarly been happy to bid well below theoretical export parities. The reason for this is down to the cover they have already taken for Jan/Feb positions. However, it is clear that sellers are also not willing to offer at lower numbers as they are well aware of the global tightness of oats. Therefore the market is in a stalemate situation, resulting in minimal trade activity. The key headlines for long holders to consider are:
    • Demand for oats continues to trend higher, which is weighing on already tight global balance sheets.
    • Data of UK oat product exports Jan’21-Oct’21 shows an 11% increase compared with the same period last year. If this pace is maintained, then the UK will achieve 104,000t of oat product exports, approximately 15,000t more than last year and the highest volume for over 11 years (Oatinformation).
    • Defra is due to release its latest UK S&D on 27 January, which we anticipate will see a lower 2021/22 end- season stock. The key areas to focus on will be the 2020/21 carryout, feed usage and the export number.
  • Bottom line, oats remain a relatively scarce commodity globally. However, price direction for UK growers is dependent on who will break first, buyers or sellers. Without export interest the UK is nicely covered.

Pulses

  • The old crop feed bean market is unchanged week on week, continuing the stability seen over the past few months.
  • In the first few weeks of the year we saw increased interest in feed beans domestically for Q1 and early Q2 of 2022. Since then some mid-range protein prices have softened and domestic interest has waned once again.
  • January 21 has been the UK’s largest month for exports to date for the 2021/22 crop year. There is less business on the books for the Feb-July 22 position but, with pea prices still firm throughout Europe and beans either at parity or a discount to peas into European destinations, further demand is expected to return in Q2 and beyond.
  • Human consumption prices are stable. Two bulk vessels have loaded this month, which are currently en-route to Egypt. Fresh buying interest is slow, with large volumes of Australian beans also arriving in Egypt shortly.
  • Pea buybacks are available for harvest 2022. Please contact your farm trader for further information.

Seed

Spring Seed

  • We have various floor stocks available for immediate delivery on to farm. Contact us today for more information.
  • Why not try the added benefits of using EXSEED seed treatment on your pea seed. Watch last year’s EXSEED YouTube video to find out more.
  • ADM has marrowfat pea Kabuki and large blues Daytona and Bluetime seed available on our market-leading buybacks.

Autumn Seed

  • Conventional six-row barley KWS Feeris is a great variety in its own right, with outstanding grain quality and high yields. KWS Feeris also has the addition of BYDV tolerance, giving great yield potential even in high BYDV pressure situations. Seed is very limited, so contact us ASAP to place your order.

Fertiliser

  • US urea pricing has fallen further this week as unsold vessels continue to arrive and buyers remain scarce in the spot market.
  • Current UK demand and timing of delivery of urea is important for UK farmers at present. Those looking for urea and urea-sulphur need to order now to ensure delivery for February.
  • ADM have both Egyptian 46N urea and Piamon 33N 30SO3 urea-sulphur in store in the UK, bagged and ready for delivery at competitive prices.
  • Geo-political tensions, production curtailment during Q4 2021 due to high gas prices and uncertainty of supply in Europe is holding prices firm in the region for ammonium nitrate-based products.
  • Reports surrounding gas supply cuts in the event of sanctions on Russia indicate that emergency measures, such as factory closures, would be needed to avoid severe shortages.
  • Potash could see current levels maintained as availability of Belarusian potash has reduced due to the current political circumstances. Phosphate prices are expected to remain high, whilst Chinese export restrictions remain in place.
  • Liquid UAN prices remain stable with limited high sulphur availability at present.
£/€ £/$ €/$
1.199 1.338 1.116
Feed Barley £ Wheat £ Beans £ Oilseed Rape £
Jan22 204-224 211-226 255-260 581-586
NB: Prices listed may vary depending on area.

NB: Prices quoted are indicative only at the time of going to press and subject to location and quality.

“Although ADM Agriculture take steps to ensure the validity of all information contained within the ADM Agriculture Market Report, it makes no warranty as to the accuracy or completeness of such information. ADM Agriculture will have no liability or responsibility for the information or any action or failure to act based upon such information.”

ADM Agriculture cannot accept liability arising from errors or omissions in this publication.

ADM Agriculture trade under AIC contracts which incorporate the arbitration clause.

Terms and Conditions of Purchase.

On every occasion, without exception, grain and pulses will be bought by incorporating by reference the terms & conditions of the AIC No.1 Grain and Peas or Beans contract applicable on the date of the transaction. Also, we will always, and without exception, buy oilseed rape and linseed by incorporating by reference the terms & conditions of the respective terms of the FOSFA 26A and the FOSFA 9A contracts applicable on the date of the transaction. It is a condition of all such transactions that the seller is deemed to know, accept and understand the terms and conditions of each of the above contracts.

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