Market Report

Thursday 25 February 2021

Wheat

  • A week of firmer prices has been driven mainly by talk of tightening supplies and increasing global demand.
  • The expected global easing from Covid-19 restrictions is seen as supportive, which was reflected in the USDA Outlook Forum projections for 2021/22.
  • Even with increases in corn and soybean sowings, 2021-22 US ending stocks are seen as little changed, while wheat carry-out stocks are forecast to decline by 16% to 698mln bushels. The forum pegged US all-wheat acreage at 45mln acres (44.3mln last year) and forecast a 1 mln bushel increase in production.
  • This means that US wheat will need a ‘perfect’ growing season. With spring planting season soon to commence, weather will become of increasing importance, as any signs of disruption affecting the supply side of the equation will prompt strong buying activity.
  • The market was quick to react and US wheat prices have traded up $13/14/t on the week.
  • Russia’s export prices followed the US increase after declining for the past month.
  • Paris front-month wheat futures have recently traded at a 7.5-year high, as concerns over tightening EU supplies and strong demand continues to squeeze market shorts.
  • EU soft wheat exports had reached 16.59mln t as of 21 February. Although that is well below the 34mln t cleared by the same week last season, there is a much smaller wheat pile to export following the poor harvest.
  • UK prices have also firmed, with old crop up just under £5/t and new crop up £2.50/t, despite sterling’s continued strengthening.
  • Yesterday the AHDB updated its UK wheat S&D figures for the UK. The release included a sharp reduction in wheat usage within the animal feed sector, replaced with increases for barley, maize and oats. Imports were projected at 2.1mln t with 1.4mln t imported as of end-December, leaving a further 700,000t to be imported.
  • This means UK prices will have to stay at import parity, which explains why the UK market has firmed, despite the weekly gain in sterling.
  • It has been announced that due to the Government’s mandate to move to E10 (10% ethanol) fuel, Vivergo, the Hull-based ethanol plant, will reopen. Together with Ensus, on Teesside , this means wheat usage will increase during the 2021/22 marketing season.
  • Looking ahead, China’s government will put greater pressure on its regions to boost grain yields and step up support for its domestic seed industry, as it strengthens its focus on food security after the Covid-19 pandemic.

Malting Barley

  • The weather has finally improved in Europe and spring sowing is now underway.
  • Heavier land in the UK is still very wet, but the optimum sowing time is around the middle of March, so there are few concerns.
  • Spring barley planting has started on the lighter land in the east.
  • Maltsters and brewers demand is mainly focused on Crop 2021.
  • Prices and premiums remain very attractive and are underpinned by the firm feed markets.

Feed Barley

  • Firming sterling and freight markets have reduced the UK’s ability to connect on export business and buyers in the Netherlands/Ireland are some €6 away from current offers.
  • Sellers remain defensive though, as ex-farm purchasing on old crop positions remains extremely thin.
  • The AHDB reduced 2020/21 availability by 246,000t and increased domestic demand by 423,000t to 5.316mln t, in their most recent balance sheet update released on Wednesday. This release confirms that feed barley markets should remain tight for the remainder of the season.
  • Nov’21 ICE London Wheat Futures are firming again. However dry conditions are returning across the UK along with some optimism around spring plantings. As a result the barley market has not followed this move on a one-for-one basis, and the discount to feed wheat has widened back out to around £15/t.

Rapeseed

  • Outside markets have been mixed over the course of the week with equities bouncing off the lows on Tuesday. Crude oil firmed with West Texas Intermediate closing above $63/barrel last night having closed at $59 on Friday. Given the potential easing of various lockdowns, analysts forecast oil could go back towards $100.
  • CBOT soybeans have also rallied again this week, up 37c/bushel since Monday. The story remains the same – tightening supply for the old crop balance sheet and an equally tight supply for new crop has added to the continuing worry over South American crop conditions.
  • The weather situation in South America is relatively unchanged. Dryness persists in Argentina – what has fallen has quickly evaporated. Brazil continues to be behind on harvest, with latest estimates at 35% complete and yields disappointing.
  • Veg oil markets remain very firm. Asian markets were all higher across the week, and on Wednesday alone, Chinese soy oil and palm were up over 100 Yuan. Malaysian palm oil closed 24 ringgit up yesterday and CBOT soy oil closed over 50 cents/lb, both now at contract highs.
  • Canadian canola closed lower on Wednesday, but only after trading higher for most of the week. March futures goes off the board mid-March, but its first tender day is today, which could make things interesting.
  • To everyone’s surprise, Matif rapeseed has rallied €30 since Monday to its highest level in eight years (€491/t at time of writing). It has previously been noted that Matif OSR was undervalued compared to global equivalents, although a rally of this nature would suggest it is highly overbought.
  • This rally, which has transferred into both delivered and ex-farm prices in Britain, is even more remarkable, as sterling rallied to above €1.16, a factor that would normally pressure UK prices.

Oats

  • Yesterday the AHDB released its February supply and demand figures. The total availability remained unchanged from previous estimates, as did the human and industrial usage (buth with increased domestic consumption and a decrease in imports). As expected, the feed usage was increased by 11%, and although the end-of-season stocks were increased, if we look at the total figure of exportable surplus and end of season stocks, this figure was reduced by 15% vs Novembers figures.
  • Spring drilling is now coming into focus. It will be interesting to understand if the hectarage matches that of the early bird survey of growers looking at alternatives to spring oats, considering this season’s significant price discount to other grains.

Pulses

  • Old crop bean prices have remained resilient, despite a firming pound, with prices unchanged on the week. The market remains driven by domestic demand with a number of consumers looking to buy over the summer positions. The export market has been quiet with the UK uncompetitive into much of Northern Europe versus the Baltic states. Whilst the UK is competitive into Southern Europe, buyers and sellers ideas are currently €10 apart.
  • Spring bean drilling has commenced in the UK and conditions are looking reasonable for now.
  • New crop bean prices have rallied in line with the move in wheat, narrowing the spread between old and new crop week. As a result we have seen an increase of farmer selling at current levels.
  • New crop bean and pea buybacks remain available. Please contact your farm trader for further information.

Seed

  • ADM has marrowfat and large blue peas on ADM Agriculture’s market leading buybacks. Pea seed availability is good, but is in high demand. Click ***here*** to view our latest YouTube video covering the exciting new product ‘Exseed’, which we have available as a seed treatment on peas.
  • Both spring barley and spring oat availability remains good and ready for immediate dispatch.
  • Don’t forget ADM Agriculture can cover all of your stewardship and cover crop requirements. Get in touch with your farm trader now with any small seed enquiries.

Fertiliser

  • Granular urea this week traded at $395/t FOB Egypt, $5/t higher than previous purchases. The market now awaits news to find new direction, with any Indian tender likely to add further support.
  • UK AN levels have remained firm and February offers are now closed. NPK products remain in short supply and April is the earliest available delivery on compound products.
  • Phosphate prices have levelled following a significant rally since January. Peak demand in Australia has supported the global market and UK values have followed replacement values.
  • MOP remains stable, although slightly higher than some levels seen in 2020.
  • Liquid terms remain stable for spring with most requirements previously bought.
£/€ £/$ €/$
1.156 1.4135 1.2225
Feed Barley £ Wheat £ Beans £ Oilseed Rape £
Mar21 164-172 203-213 223-228 415-425
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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