Thursday 3 December 2020

Wheat

Reports of favourable rains sweeping across South America, increased availability of exports from Russia and the confirmation of a massive Australian wheat crop were enough to produce long-liquidation in the Chicago grains and oilseed complex, pushing prices lower.
However, the reduction in prices and the continued decline in the US dollar has made US products more competitively priced, and rumours of further Chinese buying enabled prices to bounce from the recent lows.
While the EU and UK markets followed the US lower to a degree, the steady decoupling from the global market continues, as both regions focus on their own historically tight balance sheet.
Overall, US wheat prices are down around $4/t on the week.
Buenos Aires Grain Exchange placed the Argentine wheat harvest at 31% complete, with 39% and 32% of the respective soy and corn acreage sown. However, weather remains uncertain and crops are vulnerable to any excess dryness.
Russia’s agriculture ministry reported that the country may increase the size of its grain export quota planned for Feb15-Jun30 to 17.5mln t from 15mln t presently.
Research organisation ABARES revised its forecast for this season’s Australian wheat crop upwards by almost 10% from its September estimate, to 31.2mln t.
IKAR sees Russia’s 2021 grain crop at 125mln t, down from 130.5mln t this season, including a decline in wheat production to 78mln t from 84mln t.
Reports from within Russia suggest that 22% of winter wheat sown is in poor condition, the highest percentage since 2013.
Ukraine has exported 21.1mln t of grain so far this season, down 11% year on year due to lower corn/wheat exports. Corn exports are seen at 11.8mln t (13.2mln t last year) with wheat at 5.2mln t (6.5mln t).
The Chinese buying spree continues to pressure EU grain supply, pushing cereal prices to a two-year high as they continue to scoop up the reduced French wheat and barley surplus.
Egypt’s state buyer GASC has purchased 345,000t of wheat over the past week (285,000t Russian/60,000t Ukrainian), swelling strategic reserves to at least five months.
IGC cuts its forecast for 2020/21 global corn production to 1,146mln t, citing reductions in the US, Romania and the Ukraine.
IGC raised its forecast for 2020/21 global wheat production to 765mln t, while raising its projection of Chinese imports to 7.8mln t.
EU soft wheat exports beyond the EU were reported to have reached 9.3mln t as of 29 Nov, down 24% on the year, as the line-up of vessels suggested that the pace of exports was starting to slow.
UK prices are down £2/t on the week (May21), although physical prices remain underpinned by the tightness of the UK balance sheet, and a drop in the pound due to negative comments over the potential EU trade deal.
UK ex-farm prices continue to be supported, as the UK needs to get to, and remain, at import parity to attract larger volume of wheat imports during the second half of the season. However, with a few more questions being raised about the ongoing UK/EU trade talks, the apparent ‘close to a deal’ scenario seems a little bit less certain, with talks apparently ‘going down to the wire’.

Malting Barley

The provisional early bird survey has been released by DEFRA.
Winter barley is predicted to be up by 24%.
Spring barley down by 30%.
Our thoughts are that the winter malting area will be unchanged versus crop 2020 and the spring barley area back to similar levels we saw in crop 2018 – 740,000ha.
2018 produced a good crop with large exportable surplus of malting barley.

Feed Barley

Globally, barley values remain supported as the crop continues to attract good demand.
French barley has been trading in volume to China for new crop over the past few weeks.
Another week of waiting for some clarity on UK/EU trading terms after the transition period expires. Demand persists into the Netherlands/Ireland for Jan-Mar, although at the moment, the UK is still unable to participate. Activity will be limited until this issue is resolved.
UK barley has lost some ground against German/Black Sea values for Third Country destinations.
Wheat values are down, although barley prices remain stable to higher on the week, narrowing the spread between the two products. Barley remains very good value and is featuring heavily with UK consumers in the new year.

Rapeseed

Outside markets were firmer to start the month, with the S&P hitting a new record. US stocks had a record month, but despite a vaccine, health officials remain nervous of a post-Thanksgiving Covid wave, as we head into Christmas.
Agricultural commodity markets struggled to find support this week and entered a spate of liquidation.
CBOT soybeans struggled to break $12 again, quickly falling to $11.50 in only a few sessions, levels we haven’t seen since mid-November.
Talks of rain in South America pressured the market, although it’s still expected that the La Nina weather event will continue well into the new year. That said, in the short term rains will be helpful, although the big question will be if crops are able to catch up.
Private analysts continue to lower new crop expectations. One group lowered its crop estimates by 2mln t to 130mln t, highlighting 40%-50% of the crop under stress. They also lowered the Argentinian crop from 51mln t to 49mln t. Argentinian soybean planting is estimated at 43% complete vs 32% last week, in line with the five-year average.
The next USDA report will be released on 10 December. It will be interesting to see if it makes any major adjustment or will wait until the new year.
China has been absent from the US soybean market since 6 November, not helping trade confidence of an increase in demand, especially when Chinese crush margins have fallen from the highs. That said, there is a rumour that China bought Jan soybeans from the US yesterday, but nothing is confirmed.
Politically there are some fears of how the new US government will handle China relations going forward. Joe Biden reported that he will not immediately remove the Phase-1 agreement with China or amend tariffs, but the US government is trying to delist any Chinese business from the US stock exchange that does not comply with US accounting regulations.
Funds continued their selloff this week on a lack of bullish news, taking their overall long close to 204,000 contracts.
Veg oils started the week firmer, but weakened, hitting a three-week low. Malaysian palm oil prices came under pressure on lower than expected export figures, but it’s not expected that production in November could be up to 10% down. Malaysian export taxes remain at zero through December, whilst Indonesia raised export taxes $30, and there remains pressure on the Indian government to raise rape oil taxes to protect domestic supply.
Australia’s oilseed rape harvest is estimated to be around 70% complete. Farmer selling is estimated at around 50%.
Matif rapeseed fell to levels not seen since early November, trading €17 down to touch €400.50 on the February position. The complex struggled to find additional support with weaker US markets.
Here in the UK, rapeseed prices have been helped by the weakening of sterling in recent days. A lack of Brexit progress saw levels fall below 1.10500 yesterday, not seen since October.

Pulses

UK feed bean prices are stable on the week. Shippers are largely covered for December 20 now, and bids for the new year into the ports are thin, as there is less business on the books post-Christmas. At current parities, the UK remains competitive on the export market against the Baltics into much of Europe, but there are some aggressive offers coming out of the Baltic for Q1, which make them the most competitive into Denmark and Norway.
There remains no demand for human consumption beans to Egypt as the importers continue to look to Australia to cover their requirements. Whilst there is some demand to Sudan, trade is restricted by a lack of availability of container freight.
The AHDB early bird survey has suggested a 7% increase in the pulse area for harvest 2021, which if realised, would be the highest area since 2001. New crop bean and pea buybacks are available. Please contact your farm trader for further information.

Seed

Spring Seed

We have both Planet and Laureate spring barley processed on the floor ready to go. Please get in touch with your farm trader if you require pre-Christmas delivery.
Spring bean and spring wheat availability is beginning to look very limited.
ADM has market-leading buybacks available on large blues and marrowfat peas. Call your farm trader for more information.

Autumn Seed

Although winter seed is in short supply, we do have a couple of key late-drilling winter wheat varieties available for immediate dispatch.

Fertiliser

India received acceptances totaling 1.27mln t under its most recent tender to buy urea. A tight shipment window, by latest January 6, is likely to keep prices stable.
FOB Egypt values on the global market have risen around $30/t over the last two weeks. Replacement values, even with the firmer £/$, put urea on farm in the UK around £270/t.
Limited availability of urea portside in the UK suggests that prices should rise to replacement values in Q1, with a short window of time for product to be delivered on to farms.
New CF terms came out this week, with £5/t increases on all grades. Raw material costs are arguably priced in for the time being, but further gains on natural gas, potash and phosphates could cause another rally.
Liquid UAN values have increased with urea and AN prices moving on. Levels have risen in line with other nitrogen fertiliser products since new season.

£/€	£/$	€/$
1.1085	1.344	1.2125

	Feed Barley £	Wheat £	Beans £	Oilseed Rape £
Dec20	145-150	186-196	210-215	357-362

NB: Prices listed may vary depending on area.

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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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