Market Report

Thursday 12 March 2020

Wheat

  • US prices are down $2/t on the week and trading lower this morning as the global spread of coronavirus continues to pressure markets.
  • USDA provided few surprises in its monthly update, leaving US numbers unchanged on the month and only slightly reducing global wheat stocks to 287.1m.
  • Saudi Arabia fired the first shot of an oil price war over the weekend, slashing prices and threatening to ramp up production. This followed Russia’s rejection of OPEC’s proposal to reduce output to offset the effects of the coronavirus outbreak.
  • China’s exports and imports tumbled in the first two months of the year, as the coronavirus epidemic and measures to contain its spread, disrupted production and shipments.
  • Australian wheat farmers are seen planting a wall-to-wall crop, as rains drench parched fields. The government is forecasting a 40% lift in wheat production.
  • Argentinian farmers began a strike on Monday to protest against the government’s hike on export taxes, although shipments were not affected by the action.
  • Russian export prices fell for a sixth consecutive week due to a sharp decline in the rouble. This could lead to more aggressive marketing.
  • Ukrainian wheat exports have reached 16.8mln t so far this marketing season, up 32% year on year.
  • EU soft wheat exports in the 2019/20 marketing season reached 21.22mln t as of 8 March, 70% above 3 March last year.
  • EU (Paris) futures are down €7/t on the week, pressured by coronavirus effects, currency and cheaper Russian export prices.
  • FranceAgriMer forecasts non-EU soft wheat exports for the 2019/20 marketing season to reach 12.7mln t, which would be a six-year high.
  • Sterling has slipped against the euro after the Bank of England’s emergency rate cut. This provided some support to UK futures, although they are still down £1.80/t on the week.
  • UK spring drilling has restarted in some areas. A high area (around 200,00ha) of spring wheat is planned.
  • It remains hard to envisage how long and how more widespread the coronavirus will become, but its impact upon demand and commodity prices is easy to see.
  • The recent rate cuts by the US and the UK (ECB to follow?) and the collapse of oil prices has clouded the near-term outlook. Long-term, the marketing fundamentals at this point still point to lower prices, with higher 2020 global wheat production forecast and current inventories still deemed as burdensome. UK prices will have to remain at import parity.

Malting Barley

  • The coronavirus continues to negatively affect beer sales around the world.
  • Buyers are concerned about demand and are nervous about purchasing too much barley.
  • Prices are slightly lower in euro terms but supported by the weakness of sterling.
  • Rain continues to delay EU and UK plantings, but the weather forecast seems to be improving.

Rapeseed

  • This week once again saw an oilseeds market led by macroeconomic factors as coronavirus and the fallout of the OPEC+ meeting weighed on the world economy.
  • Measures to control coronavirus has led to lockdowns, quarantine and border closures, which saw stock markets fall sharply. This triggered circuit breakers on US markets after the S&P fell 7% from Friday’s close, which stopped trade for 15 minutes. As of Wednesday night, the DOW has fallen 20% from the highs back in Feb. Crude oil and gold continue to trade lower.
  • This week saw the release of the March USDA WASDE report and there were no major changes. The highlights are:
    • 2019/20 US soy oil ending stocks were unchanged at 1.1515 billion lbs
    • 2019/20 US soybean ending stocks 0.425 bbu, unchanged from February’s report
    • 2019/20 world soybean ending stocks were 126mln t vs. 125mln t in Februarys’ report
    • Brazilian soybean crop estimates 126mln t vs. 125mln t in February
    • Argentinian soybean crop estimates 54mln t vs. 53mln t in February
    • China soybean imports are estimated at 88mmt vs. 82.5mln t LY
  • This was however largely ignored by the market, with CBOT soybeans following outside influences instead.
  • In Brazil, AgRural reports Brazilian harvest is 50% complete compared with 57% last year (53% five-year average). Farmer selling has been abundant, with the Brazilian real nearing record lows, meaning any Chinese demand for soybeans will likely be from South America rather than the US. The main limit to selling now is port capacity in Brazil, which is now struggling to find room for more vessels.
  • In Argentina, however, selling is severely limited by farmer strikes in protest at the increased export tax, which the government put in place with the aim of cutting the nation’s fiscal deficit.
  • Friday’s OPEC discussions with Russia concluded with a no-deal on proposed production cuts. Crude fell sharply (9%) to trade at its lowest level since August 2016. Over the weekend, Saudi Arabia reacted to Russia’s no deal and launched a price war on oil markets. Crude oil fell over 30% which is the biggest one-day fall since the Gulf war in 1991, with other Middle Eastern producers looking set to increase their own production in a bid to wrestle market share.
  • This, along with the sentiment surrounding coronavirus, has had a significant knock-on effect on Matif rapeseed futures, which have fallen €22 from Thursday’s close of €382. While the European supply and demand looks tight and should in theory be supportive of prices, it is the outside macroeconomic influences that are leading the market.
  • The effect of the fall in Matif on the UK market has been offset slightly by the declining value of sterling against the euro. Currently around €1.130/£, it has fallen about 2 cents on the week, largely due to the cut in interest rates announced by the chancellor on Wednesday. Thus a €22 euro drop in nearby futures has been met with a UK farm gate drop of around £15. While exchange rates and the world economy remains volatile, so will rapeseed prices.

Pulses

  • The rally in old crop beans that we have seen since Christmas appears to have run out of steam. UK feed beans are now priced out of most destinations apart from Egypt and whilst there remains demand at these levels, any further rises will price feed beans out of the Egyptian market as they will be too expensive against competing origins which can offer better quality beans.
  • Feed bean demand domestically is also reducing, as imported peas are now being used by some of the extruders in the UK who must use a pulse product. They do not feature in diets that do not need a pulse product, as they remain an expensive protein source.
  • New crop beans continue to track wheat futures. With little spring planting having occurred to date, farmer selling is almost non-existent. Whilst we are seeing some demand, buyers and sellers are too far apart for anything to trade, as sellers continue to add a large risk premium to their selling ideas. New crop buybacks linked to LIFFE wheat futures remain available, as do ADM’s marketing pools.

Seed

  • Weather conditions are allowing drills to get going again around the country.
  • We have stock of spring barley seed ready for immediate dispatch.
  • Spring wheat seed is ever tightening on stocks from the continent. Orders should be placed ASAP if you have sowing intention for spring wheat.
  • Pulses are now all sold out for 2020 following big demand.
  • Summer cover crops are a big talking point this year, as growers look to restore some fertility back into waterlogged land. ADM has a full portfolio of mixes to cover all requirements.
  • We have delayed payment until June 2021 on autumn OSR. Available on leading hybrid and conventional varieties Aurelia and Acacia for orders up until the end of March.
  • Aurelia also benefits from an establishment scheme where the grower will be credited in the event of crop failure. Contact your farm trader for more details.

Fertiliser

  • Spot demand for the US and firmer prices FOB NOLA have pushed up global markets. The last reported trade FOB North Africa was $275/t. This is an increase of $20-25/t in 14 days.
  • The Indian tender, estimated for around 1mln t, is anticipated to be announced imminently for April shipment. Payments to the agencies authorised to hold government tenders have been cleared.
  • Prices are firm as demand is high and supply is limited globally. China has shifted from a net exporter of urea to potential importer in the space of two months.
  • UK ammonium nitrate terms have not changed since February. As we enter the usage period and with firming nitrogen markets on the continent, indications are that prices could firm here in the UK too.
  • ALZON® neo-N is an incorporated dual inhibited urea available from ADM Agriculture. A urea that performs better than ammonium nitrate in protecting your crops nitrogen supply from adverse weather, with both a urease and nitrification inhibitor. Having stabilised nitrogen release allows for the reduction in a pass also, which can help reduce traffic on saturated fields. Speak to your farm trader today for more information.
  • Questions around the efficiency of supply chains are starting to arise globally and in the UK, as governments take more rigorous action to contain the COVID-19 virus. Plant shutdowns and restricted deliveries could be possible depending on future government measures.
£/€ £/$ €/$
1.134 1.274 1.123
Feed Barley £ Wheat £ Beans £ Oilseed Rape £
Mar20 120-130 143-154 242-247 303-308
May20 125-135 145-155 245-250 305-310
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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