Market Report

Thursday 2 May 2019

Wheat

After a week of funds extending their short positions, improved winter crop ratings and talk of potentially higher yields coming out of the crop tour, US prices have been dragged down to new contract lows at all three exchanges. Despite the fact US spring wheat plantings continue to lag the five-year average, forecast of higher US and Canadian acres are seen limiting price rallies on the upside. Markets are trying to recoup after this week’s lows were set, although this may be another ‘dead cat bounce’ as global prices continue to erode as export demand slows.

EU prices have followed the US lower, with new crop values also setting fresh contract lows. Russian export prices continue to ease on the favourable crop outlook and a slowdown in export activity. Forecasts for increased EU and Black Sea production in 2019 continue to weigh and push prices lower, with the likelihood that long-holders will continue to aggressively offer into the export markets in order to off-load inventories.

UK old-crop physical prices have eased, with new-crop levels unchanged on the week despite the weaker tone coming from the global market. The old crop/new crop spread in pricing suggests a tight supply scenario, although the balance sheet portrays adequate supplies, with the continuation of new crop French imports trading into the UK for late July seen alleviating any potential supply issues.

In summary, fresh contract lows, but have we seen the bottom yet? New crop prospects remain poised on the weather with drier conditions needed to advance US spring sowings, and wetter conditions required in the EU and Black Sea to enhance crop development and yield potential. Supply fundamentals continue to look bearish and, given the current scenario, we would advocate that any growers with old-crop wheat stocks should look to liquidate their position, taking advantage of the relatively high UK old-crop prices.

Malting Barley

There is little change in either the old or new crop malting barley markets. The one area that is seeing good demand is for this autumn (harvest 2020) winter malting barley buyback contracts. We have a good selection of 2020 buybacks which include pool, fixed price and premium-over-wheat futures. Winter malting barley is in demand domestically and the gross margins for the new varieties are very attractive. Please contact your farm trader for details.

Rapeseed

Political situations surrounding the US and Canadian trade wars with China are both still ongoing. Trade talks between the US and China enter the final stages, though it’s likely that trade deal will not be signed before President Xi Jinping’s scheduled visit to Washington in June. Meanwhile China, despite pledging to purchase US soybeans, remain absent from the soybean market.

The African Swine Fever outbreaks in China are thought to be understated. There are still occasional reports of further occurrences. The Chinese Agricultural ministry now estimate 80% of pig farmers will not replenish herds until ASF has run its course. Even if further old crop business is confirmed, it is unlikely to help reduce the record US old crop carryout of 24.4mln t. South American soybean prospects are also improving and harvest in Brazil is almost complete. Weather conditions in Argentina are better and harvest is almost 60% through. Yields are better than expected so this year’s crop could meet or exceed the USDA’s 55mln t forecast.

With the old crop market quiet, headlines are focused on the extreme weather models spreading across the US. Widespread flooding with some snow continue spread across the major growing regions of American. Soybean plantings are estimated at 3% complete this week, up 2% from last year but down on the five-year average of 6%.

Forecasts show continued wet weather for at least the next couple of weeks which will undoubtedly mean lost corn acres and therefore a potential increase in soybean area of 1mln acres or more.

As a result of the ongoing trade war with China, Winnipeg Canola has slumped close to contract lows. Old crop seed still lacks a home with Europe, which is  the only logical destination providing sustainability certification can be obtained. Though there are rumours of a compensation package could be available to Canadian farmers going forward, credit would be available to growers up to $500,000 interest free if needed. This is unlikely to firm prices in the short term.

Further afield, the optimum canola drilling date for Australian farmers is upon us, although poor soil moisture and a lack of rain may see growers switch to winter wheat.

Despite the increase in carryout stocks, the European rapeseed market continues to firm on new crop concerns. Strategie Grains cut production to 18.85mln t (19.3mmt last year) with France and Eastern Europe hit the hardest. European rapeseed prices appreciated 2% in the last few sessions closing for May Day Bank Holiday.

The UK market followed EU prices higher. Brexit has brought uncertainty regarding on-far’ prices. Currency will continue to be a key driver of price direction going forward.

Oats

The old crop oat market is languishing, with millers reporting sufficient cover to the end of the season. Coupled with this, there appears to be parcels of milling quality oats left to be sold. The market does however appear to have an oversupply of feed quality oats, but with no fresh compounder demand, bids for this tonnage are very hard to come by.

The crop in the ground could do with more rain in the next few weeks and questions still linger over what the spring acreage will be.

Pulses

The bean market has been very quiet over the last week, with farmer selling coming to a standstill as a result of the recent dry weather. It has also been very dry in the Baltic states, and timely rain will be required shortly in both the UK and Baltics to prevent yield losses. Whether or not this rainfall occurs will be the key driver for market direction.

At current levels, demand for new crop feed beans remains limited to the aquaculture industry, as beans remain an expensive source of protein. Some compound diets have limited enquiries where a pulse crop is a necessity. Beans remain too expensive to feature in any compound diets in which a pulse crop is not required and would have to fall some way to feature.

Spring peas on the whole look very well, with the crop planted a lot earlier and in better conditions than last year. We have seen little demand for new crop peas to date, as Canadian origin material is offered at cheaper levels than UK origin material into the EU.

Seed

Winter Beans

Growers looking to include an area of winter beans in the rotation as a risk management plan are very justified in their thinking. The problem will come as plenty of your farming colleagues will the thinking the same. We have production of Tundra again this year and would advise anyone going into winter beans this autumn to get their name against some seed soon.

Winter Wheat

The bestselling variety of the season so far is KWS Firefly, which is hardly surprising as it has the best agronomic package available of any variety coupled with yield that rivals some of the best feed types. ADM Agriculture is supporting KWS Firefly with a market leading buyback. However, tonnage and seed are both getting very tight so book this while you can!

Variety Focus – DK Exstar

Growers loyal to the Dekalb brand now have a new ‘DK’ variety to get used to hearing and seeing a lot of – DK Exstar. Working on the success of the breeder’s trademark autumn vigour and background traits, DK Exstar manages to score an 8 for LLS, Phoma, stem stiffness and a 9 for lodging resistance, as well as having RLM7 multi-gene phoma resistance and pod shatter resistance. DK Exstar is available for this autumn sowing, please call the seed department for more details.

Fertiliser

Granular Urea

Once again, granular urea firmed globally last week, primarily due to continued demand in Asia and increased demand in the US. Middle East/Egyptian producers have sold close to $270/t fob, up $5-10/t from the previous week. Global supply is tight, and sterling remains relatively stable, as overall volatility in the currency markets remained near five-year lows. Most producers have sold for May and are at capacity which suggests minimal change in the near future. Today, stocks of urea are limited at portside stores in the UK and, with sales continuing at below replacement costs, this offers good value in comparison to the current global market. To enquire about granular urea, contact your ADM Agriculture farm trader or the fertiliser desk on 01427 421237.

Ammonium Nitrate

CF continues its terms into May. An illiquid market and limited stocks has seen NPK blend prices establish a wide spread, depending on location. CF prices on both straight nitrogen and NPK compounds are national and available for prompt delivery, proving to be a good option for top-up and after-cut requirements.

ENhancePro

ADM Agriculture’s unique liquid foliar product ENhancePro is available for those looking at increasing their milling wheat proteins and maximising their milling wheat premiums. ENhancePro is available in both IBC and pump off options to be applied at growth stage 69-75. For enquiries, please contact your ADM Agriculture farm trader or the fertiliser desk.

£/€ £/$ €/$
1.1645 1.306 1.1211
Feed Barley £ Wheat £ Beans £ Oilseed Rape £
May19 123.00-133.00 150.00-160.00 240.00-250.00 307.00-312.00
Nov19 119.00-127.00 135.00-145.00 190.00-200.00 310.00-314.00
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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