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Thursday 20 May 2021
- UK new crop futures have slipped £11/t over the week, reflecting the negative sentiment that has affected global new crop markets over the past few days and the influence of a stronger pound.
- US markets have continued their downward trend as wetter conditions across much of the main wheat growing areas improve crop prospects. EU values followed, down €14.
- This sell-off could continue in the short-term as weather turns more favourable. However, with global stocks set to remain tight throughout 2020/21 and well into 2021/22, crops in the ground will need to deliver, so the longer-term fundamental outlook remains supportive.
- There is still a lot of weather to get through, especially given that more recent historical crop losses have been caused by adverse weather during June and July.
- USDA’s National Agricultural Statistics Service (NASS) has rated the country’s winter wheat crop at 48% good/excellent, down one point on the week and four points below this time last year.
- However, winter wheat in Kansas, which grows more of the crop than any other state, is showing resilience to recent lower temperatures and drought. A recent Wheat Quality Council tour reported potential yields at a 20-year high.
- Meanwhile, NASS reported US corn and spring wheat sowings at 80% and 85% complete respectively.
- European trade association Coceral boosted its outlook for this year’s EU and UK wheat harvest to 145.8mln t from 141.5mln t previously, citing excellent yield prospects in the Balkan countries and Spain.
- UK new crop prospects will have benefitted from the recently received rainfall, with crops generally showing a marked improvement on those of a few week ago. ADM Agriculture’s projection for the 2021 wheat crop is now circa 14.6-14.8mln t, compared with 14.2-14.4mln t a few weeks ago.
- However, the UK won’t be chasing export business next season, particularly given the forecast of sharply higher domestic usage, which should be supportive to the market.
- The UK is also looking at a tight scenario at the end of this current season, supporting nearby values. Wheat imports for the season totalled 1.86mln t at the end of March, but most trade participants are working on a final figure of about 2.1mln t, so there is still a way to go.
- In addition, with the government’s roadmap out of Covid still on track, we should see a small increase in domestic usage during Q4.
- Markets have fallen over the week in line with the feed markets.
- Weather conditions throughout the EU remain favourable for malting barley.
- There are more sellers appearing in the UK market as crop conditions improve.
- Malting barley prices and premiums are still attractive and much higher than average.
- Domestic prices remain supported by tight supply. Although anecdotal, due to its scarcity some consumers are reformulating and reducing the barley level in their rations.
- New crop values are lower on the week, following global futures markets down. Fundamentally new crop feed barley remains good value so should attract good demand, and we are still not seeing much increase in ex-farm sales. We suspect markets will continue to be driven by the macro-trends in global grain prices for the time being.
- Warmer weather in conjunction with further rainfall is building confidence in next year’s crop.
- What goes up must come down, and after a few weeks of higher prices, markets were subject to a sell off during yesterday’s session.
- Outside markets opened sharply lower on fears that interest rates would rise to combat rising inflation levels.
- US agricultural markets struggled to find anything new to trade, sparking some aggressive fund selling early in the session, which pushed the market down to levels not seen since the start of May. After some disappointing crush figures at the start of the week, funds are estimated to have sold out of their recent length.
- US weather remains favourable, with rain in the forecast until the weekend, before turning warmer in the next few weeks.
- It’s been an interesting week for the oil market. Malaysian palm oil rallied to fresh highs on increased exports for the first half of May, but reversed those gains on Thursday morning on the back of rising Covid-19 cases in China.
- Other oil markets also collapsed after weeks at highs. Soy-oil peaked at the start of the week before tracking lower, while crude oil traded down due to increased US inventories and weaker stock markets.
- Officials in Argentina have proposed a law to halve the country’s biofuel mandate to 5%. If passed, this would place more soy-oil on the market. However the US government is still working on plans to increase veg oil consumption in its energy market.
- Canadian canola plantings are still underway with rain making its way across the major growing regions. Prices on old crop remain just off all-time highs, while new crop futures traded sharply lower, following other agricultural markets.
- Matif rapeseed traded back close to highs at the start of the week, but closed €14 down yesterday, closing at €528.50 on the August position.
- Sterling is rangebound – UK rapeseed prices are lower on the week as a result of yesterday’s sell-off.
- The old crop oat market has been buoyed by end-of-season demand from feed compounders as values have been at a significant discount to feed barley and feed wheat.
- This demand has carried forward into new crop, where domestic feed oat enquiries have appeared through to December. If the feed demand remains strong, this will help underpin oat values through the season.
- ADM has a great autumn portfolio, with good seed availability of winter wheat LG Skyscraper, the highest yielding variety on the 21/22 recommended list.
- Also, we are offering newly recommended Group 3 soft wheat, Merit, with preferred end use characteristics and consistent baking quality, as well as yields that excel, particularly in the east.
- If you are thinking about growing OSR this autumn, but are worried about establishment, we can offer TuYV resistant DK Excited on a market-leading establishment scheme, with £100/pack rebate on any crop that fails to establish.
- Granular urea traded higher again over the past week, with gains of around $20/t (FOB Egypt). India was unable to secure enough tonnage on its earlier tender and has tendered again. Expectations are for further rounds through the summer, supporting current prices.
- UK ammonium nitrate prices have remained unchanged. With ammonia levels at their highest for seven years, and strong agricultural and industrial demand expected over the next 12 months, AN markets could experience 10-year highs through the 2021/2022 season.
- Liquid UAN terms also remain unchanged, with expectations of much higher summer and autumn fill terms in the coming weeks.
- Phosphate prices have risen again, just ahead of the peak period for UK demand. Potash levels remain stable.
- ADM can offer forward prices on alternative PK fertilisers, giving the opportunity to fix input costs in a rising market.
|Feed Barley £||Wheat £||Beans £||Oilseed Rape £|
NB: Prices quoted are indicative only at the time of going to press and subject to location and quality.
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ADM Agriculture trade under AIC contracts which incorporate the arbitration clause.
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.