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Market Report

Thursday 11 August 2022

Wheat

  • It has been another volatile trading week, but prices remain rangebound.
  • We have seen some bearish arguments based on increasing concerns about the negative macro-economic backdrop, plus the more positive outlook for grain shipments from Ukraine, but on the flip side weather issues in Europe and South America and the threat of further production losses have helped to keep the market underpinned.
  • Give the lack of information and all the uncertainty surrounding the Ukraine export corridor it is very difficult to budget on any significant volumes of grain filtering into the global balance sheet from the region. This comes as at a time when the EU corn crop is really suffering from widespread drought.
  • With the EU corn crop now likely to be as low as 53mln t we are already seeing demand switch as market spreads prompt animal feed and multi-feed stock ethanol plants to use more wheat. However, the European wheat S&D cannot afford to see an increase in demand, especially as EU exports remain competitive to third countries and the EU-27 balance now looks even more unworkable, with the carry-out now being predicted to be as low as 5.5mln t compared with a minimum of around 10 mln t. The EU really needs exports from either Ukraine or Russia to kick in and start filling some of the demand to North Africa, Asia and the Middle East.
  • Closer to home the UK wheat harvest continues at pace. We would suggest that 60-70% has now been completed nationally, with most of the South East and East Anglia now finished. Yields on some later crops in Lincolnshire, Yorkshire and further north seem to have done markedly better than Eastern light land wheats and our overall 8.5t/ha estimate looks pretty safe.
  • The quality of the crop looks good, aside from proteins which are markedly lower. However, specific weights are fantastic and Hagberg and screenings are not causing any problems. In addition, so far mycotoxins are not an issue.
  • In terms of export competitiveness, the UK remains unhelpfully out of the shipping picture. With cash premiums over futures for feed wheat in East Anglia now approaching zero for the autumn and with discounts for harvest, it seems unlikely that basis will do much to help find overseas buyers. Futures or FX need to do the work; perhaps MATIF goes up, maybe sterling falls – either way, something needs to change.
  • In the medium term, both the fundamentals and seasonality would suggest that we should be close to establishing market lows. However, Nov22 ICE London wheat remains in its technical downtrend that has been in place since mid-May. We need to see the £275 and then £283 levels broken if we are to gain any confidence in a breakout of the £255-275/t range.

Malting Barley

  • Similarly to feed, the malting barley harvest across Europe has been excellent. Recent reports from Scandinavia are showing massive yields, but very low nitrogen levels. However, these are no longer a concern as they can be blended with higher nitrogen French barley.
  • Encouraged by widespread reports of good malting quality, buyers are relaxed going forward. Premiums have come off heavily to only £15-£25/t over feed, not helped by the rising feed market. FOB markets are also lower on the week as demand disappears from the picture, eying up lower prices.
  • We expect further pressure to premiums as we go into the season, with a strong looking feed market and a comfortable surplus of malting barley in the UK.

Feed Barley

  • Feed barley markets are higher again on the week, helped along by firmer futures.
  • Spot pressure has all but disappeared as the bulk of the feed barley harvest is now behind us and farmers focus their attention on combining other commodities. Both yield and quality have been strong throughout.
  • Export demand has been quiet, but equally farmer selling is very slow at the moment. Trade sellers remain cautious as barley is easily the cheapest feed grain, and hedging any sales in the cash market is tricky.
  • We expect the feed barley supply to remain tight as we head into the winter.

Rapeseed

  • CBOT soybeans rallied again this week, with September values closing over $15/bushel. The spread between August and September beans are now close to $2, with August expiring at the end of the week.
  • Weather is still being closely watched, with a potential of hot/dry weather returning in the coming weeks. Crop ratings have slipped to 59% good/excellent vs 60% last week, while a potential increase in Chinese demand also lent support.
  • The August USDA report will be out on Friday. Expect to see the market position square ahead of its release. Pre-report estimates are calling for yield drops below 50 bushels/acre, which will be below where everyone thinks USDA will be.
  • China continues to play war games close to Taiwan in protest to the US visit last week, but did return the US bean market to cover close to 300,000t of soybeans. The US is now considering trade deal amendments following China’s actions in Taiwan.
  • Crude oil prices dropped back below $90/barrel this week, which weighed on the market, although veg oils did see some support following the US green spending bill, which would see higher veg oil usage in the biodiesel market. That said, demand remains low with China still in lockdown and high palm stocks in Indonesia.
  • Canadian canola closed higher. Weather remains favourable and yield estimates are starting to increase in some areas in the east, but look lower in the west. Crop estimates remain unchanged for now.
  • MATIF rapeseed traded higher to touch the top of its recent range. The EU harvest is now largely complete, with yields and oils higher than expectations. Coverage seems ample in the nearby positions given the low water levels on the Rhine, which keeps inland crushers out of the market.

Oats

  • European oat markets remain largely unchanged on the week, with little market activity. Consumers seem to be very relaxed, which has led to some wide bid/offer spreads, with sellers taking the influence of other grain commodities to offer higher prices. We are still a few weeks away from getting some definitive harvest data out of Scandinavia and this is delaying the direction of the market. The hot weather in Europe is certainly having a negative impact on the EU maize crop, which is helping support the feed oat price as compounders are needing to price in greater quantities of other feed commodities. Initial price indications suggest UK oats are competitively priced into Europe and this could see good export volumes in the coming months.
  • Here in the UK, the winter oat harvest is largely complete and quality continues to be very good with the specific weight averaging 55.92kg/hl and screenings at 3%. This could help narrow the gap between UK oats and Scandinavian oats to European buyers. However, spring oats are still the key in determining the UK market. Early sample results suggest some variability in the spring oat quality, but we will know a lot more in one week. If springs are good quality, we could see feed oats appreciate relative to milling.
  • Bottom line, the UK market continues to be awaiting harvest quality with EU buyers sitting tight ahead of the Scandinavian harvest before showing their hand.

Pulses

  • The UK pea harvest is nearing completion at around 70% nationally, which is a little slower than expected at this time last week. However, many crops were drilled relatively late this year which has led to this shortfall.
  • Quality is looking good, with bleaching from the samples we have received so far averaging 5%. This benefits many growers who chose the high fixed price contract option on marrowfats as well as those who selected the no bleaching claims with bonuses for better colour.
  • Moistures are still averaging 14% which is good news, as we feared the lack of rain may impact the brittleness of the peas – this has not yet proved to be the case.
  • Yields continue to range between 2-4t/ha on marrowfats, with the range slightly higher for large blues and yellow peas.
  • We are keen buyers of any open market marrowfats and will offer competitive pricing for any parcels on farm.
  • Marrowfat buybacks remain to be available for 2023/24 season, with the September/October movement period now closed. Please ensure to book onto the remaining pre-Christmas positions, all bought outside of that period will move in February 2024.

Seed

  • With exceptional yields from our seed crops, we now have some more Champion winter wheat to offer. As the highest yielding variety on the AHDB recommended list, this spare tonnage is guaranteed to sell fast.
  • Two-row winter barleys are still under high demand and seed deliveries are already making their way on to farm. We have limited availability of six-row conventional variety, KWS Feeris. Not only is KWS Feeris a great variety in its own right, it also is supported with BYDV tolerance, giving the confidence to sow early.
  • Looking ahead to the rain forecast in some areas after the weekend, we have a range of OSR varieties available for imminent delivery. If you’re still unsure, why not order DUPLO on our sale and return offer, giving the flexibility to return up to 75%.
  • We have some great options of companion crops available to help aid OSR establishment. Get in touch with your farm trader to get your companion crop ordered for fast delivery.
  • Cover crop availability is beginning to be limited in some areas, however we still have a range of cover crop straights available with the option to mix. Don’t risk ordering late and missing out.

 

Fertiliser

  • The European and UK energy crisis continues to hit headlines this week*, leading to fears over blackouts in January. This could be a warning sign regarding future nitrate production in the region once again.
  • Availability of ammonium nitrate remains steady at present, but current UK demand is relatively subdued. Any sudden increases in purchasing would have an immediate upward impact on AN pricing in the UK.
  • Granular urea remains available in ample supply and is available from ADM at significant discount to imported and UK ammonium nitrate. Increase in demand for the product is expected across Europe in September and price increases are anticipated.
  • To expand our urea portfolio we now have 46N prilled urea available for delivery for October, November & December. Prilled urea pricing is likely to follow granular market movements.
  • Liquid urea ammonium nitrate terms remain available. Spring delivery terms have been popular over the last week. Upward moves in urea would support higher UAN terms for both autumn and spring prices.
  • PK prices remain stubbornly high at present, for both traditional and alternative PK grades. We have a variety of options available to the UK farmer for this autumn application.

*Reuters Energy article here.

£/€ £/$ €/$
1.181 1.22 1.033
Feed Barley £ Wheat £ Beans £ Oilseed Rape £
Aug 22 225-235 250-265 270-275 505-525
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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