Market Report

Thursday 21 May 2020

COVID-19 – Safe transfer of grain passports and self-isolating

It is important that all farmers follow UK government advice with regard to sanitising and best practice. We strongly recommend all participants in the grain supply chain read this advice from AHDB https://ahdb.org.uk/knowledge-library/coronavirus-guidance-for-combinable-crop-deliveries-and-collections

If farmers are quarantined or self-isolated for a period of time and therefore unable to load combinable crop sales or accept deliveries of seed or fertiliser, please advise your ADM farm trader as soon as possible and we can then delay the collection/delivery until the period of self-isolation is complete.

To date, the grain supply chain is working close to normality. All parts of the industry are working well together, and the situation is obviously under constant review and of the utmost importance in keeping the nation supplied. ADM Agriculture would like to thank all our customers for their ongoing support.

Wheat

  • Northern hemisphere crop prospects seem to be fading after months of prolonged drought. Recent rains have been beneficial but have not eliminated dryness concerns.
  • However, the continued impact of coronavirus on demand means old crop stocks are still likely to increase, compared with recent projections.
  • As the markets move towards the harvest period, weather, politics and uncertainty over future commodity demand make it difficult to predict price direction. However, drier, hotter weather across much of the northern EU does not bode well for production.
  • US prices are up $2-3/t on the week, supported by talk of lower EU and Russian wheat crops as concerns over dryness builds.
  • EU (Paris) new crop futures followed suit, rising about €4/t on the week.
  • UK (London) new crop futures are up about £6/t on the week, helped further by a weaker pound and talk of a move to negative interest rates.
  • Russia’s Ag Ministry lowered its forecast for the coming harvest by 5mln t to 120mln t. Trade talk suggests that current export quotas may continue into the new marketing season.
  • Ukraine is likely to reduce its export quotas for the 2020/21 marketing season due to a smaller harvest caused by severe drought.
  • The country has almost completed its 2020 spring sowing campaign, sowing 14.1mln ha. The ministry has revised its grain crop forecast upwards to 65-68mln t following much needed recent rainfall.
  • Farm office FranceAgriMer reported a further decline in the condition of France’s soft wheat crop at to 55% good/excellent, in the week ending 11 May, down 2% from the previous week.
  • Germany’s winter wheat area has been reduced by 7% on the year to about 2.84mln ha. The Farmers Co-op Association predicts a 3% fall in output to 22.38mln t.
  • Romania’s wheat output is expected to fall sharply this year due to a prolonged drought, although the country should amass a robust surplus for export.
  • EU monitoring unit MARS has cut its average soft wheat yield forecast for the EU to 5.72t/ha, down from 5.87t/ha last month, as recent rains failed to replenish soil moisture levels.
  • Inother news, China is allocating more low-tariff import quotas for maize this year, and may expand its use of wheat quotas, as it seeks to step-up its purchases from the US.
  • Looking ahead on a more bearish note, the UK government has proposed zero tariff on imports for maize and higher quality wheat from 1 January 2021. These would replace the current EU tariffs and could undermine domestic wheat levels, depending on price parities.

Malting Barley

  • China has imposed a significant tax on Australian barley which will change trade flows for crop 2020.
  • France could be the main beneficiary as it already trades with China.
  • There has been a little rain across the EU, but more rains are needed.
  • There continues to be a lack of farmer selling which is normal for this time of year.
  • We have seen some buying interest over the last week, and EU malting barley prices have risen around €7.
  • UK prices have firmed as well, but this has been more currency driven rather than domestic demand.
  • There is speculation of some pubs being able to reopen in July.

Rapeseed

  • This last week has seen oilseed markets firm up as the price of crude oil hit levels over $30 per barrel and more global optimism as lockdown measures ease slightly.
  • On Wednesday the Energy Information Administration (EIA) released data to show that US crude oil inventories fell by 5 mln barrels in the week to 15th May to 526.5 mln barrels.
  • In the US, soybean plantings are well under way at a record pace, reported at 53% complete vs a 5-year average of 38%. Talk of further trade to China has not materialised this week, but expectations continue to underpin the market which has now risen by 8c per bushel ($2.94/t) since the weekend.
  • In South America, the Brazilian harvest is complete, the soybean line-up increases to 11.7mlm t, which is way above the 6.9mln t we saw last season, and a record for this time of year. In Argentina a weaker peso incentivised farmers to hold on to beans as a hedge against inflation.
  • In Australia, canola planting is nearly complete. Near-perfect conditions could see a crop over 3mln t for next season, slightly easing pressure on EU supply and demand.
  • Rains in Canada have held back planting, which is running about 10% behind average. With more rain in the forecast, European crushers will keep an eye on progress with such a heavy reliance on imports expected next season.
  • The EU MARS report lowered rapeseed yields by 6%. If realised, the crop figure could be as low as 16mln t. Crush is usually between 23-25mln t. Demand destruction will probably reduce it towards the lower end of this range, if not slightly lower. Imports will need to make up a third of all crush demand in the next marketing year, depending on how much stock can be carried over. Matif futures have rallied around €6/t on the week.
  • It was announced this week that in the event of a ‘Hard Brexit’ there are currently no plans to impose an import tariff on rapeseed from the EU, which should put some cap on prices. However, in the likelihood that imports are required from elsewhere, such as Uruguay, details of trade flows, WTO rules and MFN status, are yet to become clear.
  • Sterling weakened to fall below 1.12 against the euro following comments from the Bank of England that it was looking at setting interest rates at negative levels in a bid to boost consumer demand. On Wednesday the government made the first steps towards making this a reality by selling bonds at a negative yield for the first time in history – that is buyers will receive less money back than they paid for it. This complemented the rise in Matif, placing ex-farm values around £10 higher than this time last week.

Oats

  • The old crop oat market continues to tick along, with prices remaining supported by continued domestic and export demand. However, from a purchasing perspective the market feels largely done for the season.
  • In the UK we need some rain in the near future. The longer we go without it, the likelihood poorer yield and quality will increase, which would act to widen the milling premium over feed.

Pulses

  • Old crop bean demand remains subdued but may pick up after Ramadan.
  • The continued depreciation of sterling against the euro has lowered new crop bean values in euro terms which has prompted some buying interest from the aquaculture market. With sterling continuing to slide and farmer selling almost non-existent as a result of concerns regarding yield potential, prices are likely to remain supported in the weeks to come.
  • Australia’s planting of new crop is approaching completion. Conditions are considered to be close to ideal and there has been a large increase in bean plantings as a result.

Seed

  • We have a great portfolio of OSR varieties to offer with a selection of different traits to suit your needs.
  • If you’re still deciding what to do this autumn about establishing OSR, ask your farm trader about the OSR establishment schemes we have to offer.
  • There is still time to order your cover crops to put some goodness back into the soil this summer. We have a variety of mixes available to choose from and we can cater to your bespoke needs. Click here to view our small seeds brochure.
  • We also have a selection of over-yeared wheat and barley seed available for July delivery.

Fertiliser

  • Global urea pricing has stabilised following the lows that preceded the Indian tender. Another tender will be issued in the second half of June, and north African product has firmed $10/t on the week, with producers not liking these low values.
  • Global urea levels look supported, even though demand into the Northern Hemisphere at present is low. Demand will pick up again, but with Covid-19 restrictions now easing, some are now asking where do gas prices go from here?
  • UK buyers are awaiting new season ammonium nitrate (AN) terms. With an increase in demand expected, along with the many concerns still around the effects of Brexit, if the start price is right, then we expect a sharp uptake on early offers.
  • Purchasing nitrogen going into a new season should always be approached as being a risk management exercise, with forward grain pricing remaining firm. If the price makes sense, then it makes sense to lock some tonnage in.
  • In Europe, Yara have increased their July price again this week, and with the weak £/€, this could mean that UK product is even more competitive against imported AN as the new campaign is launched.
  • As machines continue to improve, new Independent spreader testing on Nitram confirms a 36-42m spread width is now achievable.
  • With a UK new season start day perhaps not too far away, our advice is to be prepared to act if the terms work for you.
£/€ £/$ €/$
1.1125 1.2245 1.1005
Feed Barley £ Wheat £ Beans £ Oilseed Rape £
Jun20 125-133 152-162 240-245 319-324
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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