Market Report

Thursday 16 January 2020

Wheat

  • US prices are up about $3/t on the week, supported by talk of reduced export competition and optimism over yesterday’s signing of phase one of the US/China trade deal.
  • USDA produced few surprises in its recent updates. Although US and global wheat stocks were trimmed, they were in line with trade expectations.
  • USDA sees 2020 US winter wheat sowings at 30.8mln acres, down 1% year-on-year, and again slightly above trade estimates.
  • Ukraine’s 2019 grain harvest hit a record high of just over 75mln t, up from 70mln t a year earlier. As of 10 Jan, exports were reported at 32.1mln t for the marketing year, with China being one of the largest importers.
  • Rumours have surfaced about a possible export restriction on Russian wheat exports, with talk of exports being curbed to 20mln t after 31 January.
  • Egypt’s state buyer GASC purchased 240,000t of wheat (180,000t Russian and 60,000t Romanian) for 1-10 March shipment at its latest tender. Prices rose $4-5/t above the previous purchase, much in line with the rise in the global markets.
  • EU prices are up about €2/t on the week, with both futures and cash markets supported by France’s transport strike, which is limiting export supplies to the ports.
  • UK prices are up about £3/t on the week, again supported by a general supply squeeze and the firmer global tone. Farmer selling activity has picked up for both old and new crop.
  • Planting progress in the UK has been very patchy to non-existent. The two-week forecast for the UK looks dry, but so was last week’s when we saw significant rainfall in regions where planting was becoming a possibility. We need a long window of drying weather to allow not just winter wheat planting to resume but also to allow ground conditions to improve enough to allow spring planting to be a certainty.
  • Traders’ optimism over the US/China trade deal, talk of Russian export restrictions, the ongoing French transport issues and UK crop conditions / plantings should continue to underpin the markets. Although it is worth noting that both old and new crop values remain historically high.

Malting Barley

  • The new year continues in the same pattern, with very little buying interest from UK maltsters.
  • Domestic trade is limited to merchant short covering.
  • Malting premiums are coming under pressure against the feed barley market, with haulage eroding malting premiums.
  • Currently there is no UK FOB market.
  • With the UK spring barley area for 2020 likely to increase significantly, it would be advisable to contract some of your tonnage.
  • Our pool contracts for 2020 are available to book.

Rapeseed

  • January’s USDA report started the trading week with a bearish tone. US soybean yields increased above trade estimates to 47.4bpa but the harvested area was reduced. Compared to December’s report, this resulted in an 8mln/bu increase in the overall forecasted harvest figure to 3.558 bln/bu. As a result, both US and world soybean ending stocks were increased from December’s report.
  • South American crop estimates for Argentina and Brazil were both left unchanged at 53mln t and 123mln t respectively (previously 55.3mln t /117mln t).
  • The trade then focused on yesterday’s historic signing of the phase one agreement. Delegates from China and the US met in Washington to sign the agreement, where China agreed to purchase $40bln of US ag commodities a year for two years up until the end of February 2022.
  • However, details of the report were limited, though one point stated that “market conditions” will dictate the timing of purchases within a given year. Tariffs will remain in place until phase two, but waivers will be granted by the Chinese government when making purchases.
  • Soybeans closed 13 cents lower, as the trade began to digest the 86-page document. The trade remain apprehensive about how this agreement will work if Brazilian soybeans remain so much cheaper.
  • Elsewhere, tensions in the Middle East have eased over the last week, resulting in lower prices in most energy markets.
  • Veg oil prices continued to consolidate, despite lower-than-anticipated December production figures of Malaysian palm oil reported at 1.33mln t, down 26% from a year ago. However, on Monday, India announced a temporary import ban on Malaysian crude palm oil, leading to a fall 115 MYR (~$29USD)/t from the highs of Feb 20 as funds saw an opportunity to unwind long positions in an overbought market.
  • Notwithstanding, India’s coverage for edible oils is reported at a four-year low, which should create demand for other veg oils.
  • Matif rapeseed, having traded at its highest level seen since March 2017, also saw sharp consolidation this week. The decline of world veg oil prices also gave rapeseed markets the excuse for correction of May 20, with Matif falling €13 from recent highs.
  • UK rapeseed prices began the week approximately 9% higher than at the start of December to make season highs. However, the link to Matif has meant that levels have fallen, mitigated slightly by weaker sterling. The run-up to Brexit will be key as volatile currency will impact UK farm prices.

Oats

  • Export of feed oats have continued from the UK throughout January. With the UK compounder oat usage reported to be down 10% year on year, this will continue to be necessary if we are to reduce the surplus on our balance sheet. Buyers are now targeting the February/March position, but with farmer selling on the low side, actual trade for this position is light.
  • The domestic milling market remains largely unchanged on the week, with premiums continuing to be paid for Mascani over all other varieties.

Pulses

  • Australian faba bean prices continue to firm, which is driving demand for UK beans from Egypt and lifting values for both feed and human consumption quality.
  • Importers in Egypt are relaxing their import specifications for UK beans as a result, with spring beans containing up to 20% insect damage now suitable for human consumption and some importers looking to buy UK feed beans.
  • New crop pea buybacks remain available for marrowfats, large blues and yellow peas.

Seed

  • There is still demand for winter wheat in between the showers. We have treated and recleaned stock ready for immediate dispatch.
  • Spring cereal processing and deliveries are well underway.
  • We now have stock of RGT Planet and Laureate which can be on farm in as little as 24hrs.
  • LG Diablo would still be our preferred variety for those growers going for yield over premium potential.
  • Early order incentives for maize seed finish at the end of the month.
  • Imported spring wheat is still available.

Fertiliser

  • North African granular urea has been sold in the high $240s/t FOB this week, moving replacement values up in the UK to £258-60/t on farm.
  • However, the UK domestic market has been trading below replacement values throughout January from existing stock. Some traders are now expecting values start to move up in line with higher international levels on offer today.
  • Demand has been increasing this week despite the patchy weather. Farmers are making the most of weak prices that have been driven by importers’ desire to get stock moving again.
  • CF’s nitrogen product prices have been reduced to compete with imported fertilisers and reflect the movement of sterling, global gas prices, and the decline in demand in the UK through the autumn. Uptake has been strong, and there is a clear incentive for those who are able to take immediate delivery.
  • Many buyers today are committing as they value having product on farm at this time of year, as well as appreciating that prices offered today are not sustainable for many importers.
£/€ £/$ €/$
1.17 1.3055 1.1155
Feed Barley £ Wheat £ Beans £ Oilseed Rape £
Jan20 122-130 144-156 190-195 335-340
May20 127-135 148-160 195-200 337-342
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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