Market Report

Thursday 26 March 2020

COVID-19 – Safe Transfer of Grain Passports & 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

  • US prices are up just over $16/t on the week as rumours of Chinese buying and the near $2trn US government stimulus added support to the markets.
  • US wheat prices are no longer competitive for export, although support remains strong due to increased demand from domestic flour mills.
  • US ethanol plants are closing early for summer maintenance, as low corn prices are seen producing poor margin returns amidst reduced demand for ethanol.
  • South American weather sees favourable rains moving into Argentina over the next two weeks, although crops have been stressed due to drier conditions.
  • Near-term bottlenecks at Brazilian ports are seen easing, as workers at one of the largest ports, Santos, decide not to strike over coronavirus concerns.
  • Analysts put the Brazilian soybean harvest as 66% complete vs 67% y/y, with the Safrinha (second corn crop) reported as being 96% planted.
  • Russia has suspended exports of ‘processed grains’ from 20 March for 10 days, although no restrictions are seen for feed grains, as previously reported.
  • Despite the coronavirus, Ukraine’s deputy economy minister says there are no plans to limit food exports.
  • Recent frosts witnessed across much of the Ukraine may have caused damage to winter grains in some snowless areas.
  • Kazakhstan bans the export of wheat flour, due to concerns over maintaining adequate domestic supply.
  • EU (Paris) futures are up just under €14/t on the week, supported by firmer global markets.
  • EU 2019/20 wheat exports to non-EU countries as of March 22nd were reported at 23.21mln t, up 72% y/y.
  • The condition of France’s soft wheat crop was stable w/w, reported as being rated 63% in good/excellent condition, although well shy of the 85% at the same time last year.
  • London futures are up just under £10/t w/w, as firmer global markets and wild swings in currency continues to provide much volatility.
  • Another week driven by the coronavirus pandemic, and its impact upon the commodity markets. The stimulus from the US government to try to protect businesses from the virus was seen as supportive, which pulled commodity, energy and equity markets off the recent lows. News that China have actively been buying US products also gave the markets the support to move higher.
  • UK farm prices have benefited from the rise in global markets, and have even become competitive again, resulting in some additional export trade being concluded
  • While this should slightly reduce the potential carry-over, it is a case of ‘robbing Peter to pay Paul’, as with the greater need to import next season, the UK will need to get back to import parity for new crop.

Malting Barley

  • World beer sales continue to be impacted by the global lock-down.
  • Some UK breweries and distilleries have already shut.
  • Malt off-take is severely impacted, and old crop malting barley is having to be moved as feed.
  • Maltsters are worried that their barley bins will be full of malt at harvest, restricting what they are able to take in at harvest.
  • Some maltsters are trying to cancel/cash settle harvest sales.

Rapeseed

  • It was yet another volatile trading week for all markets, as everyone digests the latest coronavirus updates and the consequences for the world economy.
  • Markets traded sharply down at the start of the week with the US senate blocking the implementation of another US rescue package worth €2 trillion. It wasn’t until Wednesday that US officials announced the package had been approved, which gave outside markets confidence to trade limit up. The DOW managed to reverse the downtrend for a day to trade up 11%, its biggest gain in a day since 1933 with the S&P, gold and crude oil all trading higher.
  • However, US stocks and equities markets came off their highs before the end of yesterday’s session. Stocks dipped late on Wednesday after the eagerly anticipated relief package was approved by the US Senate, and after two days of gains, investors saw this as an opportunity to take profit.
  • After trading higher for most of the week, CBOT soybeans struggled to sustain the recent highs after trading higher for the last six sessions.
  • Whilst the slowdown in US ethanol plants will reduce DDG production, soymeal prices rose to a five-month high before succumbing to profit taking on Wednesday.
  • The USDA will release US planting outlook at the end of the month. Private forecasts peg the US soybean area for next season at 85.6 m acres vs. the USDA’s current estimate of 85 m acres, both are lot higher than this season’s 76.1 m acres.
  • In South America, supply issues supported prices earlier in the week. Rumours of shipping container shortages and bottlenecks in Brazil could cause supply issues in the coming weeks, whilst dock workers in Santos called off strike action, and Argentinian crush workers may strike over coronavirus safety issues. However, once the rumours were around operations beginning to get back to normal, support quickly disappeared.
  • Weather wise the ongoing dryness in southern Brazil keeps the market supported with private forecasters reducing crop estimates. AgRural estimate the soybean harvest at 66% complete vs. 67% complete last year.
  • Crude oil traded higher at the start of the week and with firmer energy prices veg oils found support, palm oil and soy oil both trading higher. Palm oil was also supported by the decision from the Malaysian government to close some of the larger palm plantations in an attempt to limit the spread of coronavirus.
  • In Canada the vessel line up is starting to reduce slightly, but there are still 48+ vessels waiting to get loaded. Crush margins increased, which saw support for futures prices, as crushers try to take advantage of the recent increase.
  • In Australia the planting season is nearly upon us, and most of the major growing areas have seen decent amounts of rain over the last few weeks, which will encourage farmers to get on and plant whilst the going is good.
  • Matif rapeseed prices continue to be dominated by outside market direction, trading in a €10 range. As lock-downs and travel restrictions remain in place for most countries, demand for crude oil and biofuel has fallen dramatically. Increased food production provides some support to prices but given that approximately 70% of EU rapeseed is destined for the biofuel market, and fast-food retailers now closing, this will ultimately weigh on prices.
  • Here in the UK prices track EU markets. Currency markets remain very volatile, reacting to the latest fiscal stimulus reports. Sterling rallied to 1.1000 in yesterday’s session, before touching back to 1.0800. Some analyists predicating the risk of sterling trading at parity with the euro in the future is high. As such UK farm gate prices remain volatile.

Oats

  • The domestic oat market has seen a spike in spot demand due to COVID-19, with ex-farm values for Mascani reaching season highs. Fresh procurement remains relatively slow, and anecdotally there do not appear to be many large parcels of milling oats left on farm.
  • Weaker sterling against the euro has also acted to improve value in the export feed market to the near continent. However, the high volume of exports earlier in the season seems to have cleared up a lot of the feed oats that were on farm, and again, anecdotally there is not a great volume left on farm that is not yet sold.
  • The favourable weather at the moment is of great benefit to spring drilling. As mentioned in previous market reports, this will be key for the 2020/21 harvest production. Following the incredibly poor winter drilling conditions, a large quality spring crop is pivotal to next year’s milling oat supply.

Pulses

Beans

  • Strong devaluation of GBP followed by a bounce has caused high market volatility.
  • Limited demand for feed and human consumption beans on the back of this, as buyers step out of the market.
  • Worldwide factory downturn as workers self-isolate and governments put public on lock-down.
  • ADM still has space to buy beans at either Immingham, Great Yarmouth or Avonmouth.
  • Drying field conditions around the UK mean beans are now being planted.

Peas

  • Most buybacks are now full. Please enquire to the trade desk if you are still interested in our buyback.
  • Old crop supply remains limited, so the market is quiet.
  • Pea seed is now being delivered to farm, so drilling will start shortly.

Seed

  • All varieties of spring barley remain available; however, lead times are longer than usual.
  • We have seen an increase spring OSR orders this week, with availability across most varieties remaining good.
  • Stocks of maize seed are getting very tight, so orders should be placed ASAP to get a preferred variety.

Fertiliser

  • The impact of coronavirus is beginning to be seen on domestic and global fertiliser supply. Fertiliser production capacity in some regions, other than just China, has seen reduced capacity. Estimates of 2.5mln t reduction in production capacity has been reported in India this week across urea (est. 1.3mln t reduction), DAP and NPK plants. India is one of the world’s largest consumers of fertiliser. This news could have delayed impact on the global fertiliser market, depending on how long shutdowns and reduced capacity goes on for, as their current stocks deplete.
  • Recent good weather has increased spring cropping areas which previously might have been left fallow which has seen a surge in spot demand for fertiliser.
  • Demand and weak GBP has pushed UK prices up on imported fertilisers that were low in stock before the surge in demand. Some straight fertilisers have firmed 8-14% w/w, which has increased NPK blend values too.
  • Nitrogen has also firmed. April terms for AN and urea have seen 2-4% increases w/w also.
  • ADM Agriculture highly recommend orders to be placed well in advance of usage where possible, to ensure it arrives on farm in good time. Speak to your farm trader on any fertiliser requirements needed for spring today.
£/€ £/$ €/$
1.093 1.199 1.0975
Feed Barley £ Wheat £ Beans £ Oilseed Rape £
Mar20 130-140 159-170 240-245 303-308
May20 132-142 161-171 242-247 305-310
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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