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Market Report

Thursday 4 November 2021

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Wheat

  • Despite some profit-taking yesterday, markets managed to post weekly gains as the long-term bullish fundamentals remain intact.
  • However, this marks something of a breather following the recent sharp rally, which may result in further short-term liquidation as traders bank profit.
  • Long-term the market still looks supportive, as recent international tenders show that importers still have plenty of wheat to cover in the new year, at a time when export availability is expected to decline.
  • Europe is a good example. Matif Dec 21 wheat traded to an all-time high of £292.75/t on Tuesday, before slipping back slightly, but it remains supported by a perceived tightness in exportable quality wheat.
  • EU exports to other countries are currently estimated at 55% above last year. These shipments have been boosted by early season sales from Bulgaria, Romania and the Baltic states, but supplies in these countries are diminishing rapidly.
  • Given the tightness of the EU wheat balance sheet, the current pace of exports remains unsustainable, so shipments beyond the bloc will need to be rationed.
  • This may be easier said than done, especially with continued interest from China for French wheat. Export demand apparently remains robust elsewhere – Saudi Arabia has purchased 1.27mln t of milling wheat for shipment in the new year, and Egypt bought a further 180,000t of Russian wheat for December 11-20 shipment, only a few days after its previous 300,000t purchase. Morocco’s government has lifted its wheat import tax on both soft and hard wheat imports.
  • Meanwhile, the likelihood remains that Russian exports will decline in the new year. The pace has already slowed, with yearly estimates placing exports at 15.3mln t as of 28 October, down 14% year on year. Conversely, Ukraine’s wheat exports reached 12.2mln t as of 29 October , up 18% on the year.
  • As far as new crop is concerned, USDA reported 43% of the US winter wheat crop is in areas of either moderate or intense drought, up from 41% last week.
  • Ukraine’s farmers have sown 7.1mln ha, or 90% of the planned area, including 6.1mln ha of wheat and 844,000ha of winter barley.
  • The EU Commission further reduced its estimate for the 2021/22 soft wheat crop to 130.3mln t from 131mln t, forecasting lower production in France, Romania and Hungary. French soft wheat plantings were 61% complete as of 25 October, in line with last year’s 63%.
  • Recent rains in Argentina have helped improve the outlook for wheat production, with Buenos Aires Grain Exchange, raising estimated output to 19.8mln t.

Malting Barley

  • EU and UK malting barley prices are unchanged over the past week.
  • The UK industry continues to struggle with logistics caused by a shortage of lorries and ships.
  • There are suggestions that the EU crop 2022 spring barley area is likely to increase due to the high fertiliser prices.
  • Crop 2022 contracts are available. Please contact your ADM Agriculture farm trader for details.

Rapeseed

  • Weather in the US is unchanged, with some rain in the forecast for next week. Soybean harvest progress is expected to increase from the current 79% complete, which compares with the 86% figure this time last year.
  • Attention is beginning to turn to the next USDA world supply and demand report, due out on 9 November. Soybeans remain rangebound, whilst soy oil tried to trade higher. USDA’s recent monthly crush report put soy oil stocks at their highest in nine years, which pressured prices.
  • Energy markets also struggled to rally, with crude moving to four-week lows after the trade reported higher than expected US stocks.
  • USDA announced further sales of US soybeans to China at the start of the week but nothing since. Trade talks continue, but there is no news on the phase one renewal.
  • In South America, growing conditions remain favourable. AgRural estimates Brazilian soybean plantings at 52% complete, up from 42% last year. Argentina has been mostly dry, with scattered showers expected today through to the weekend. Temperatures remain close to normal. Argentina’s agricultural ministry estimated farmers have sold up to 77% of old crop and 6% of new crop.
  • Malaysian palm oil closed higher again this week as the trade awaits the outcome of an Egyptian tender for veg oils. Market is closed for a holiday today.
  • Canola made new highs again this week. Higher fertiliser costs and lack of glyphosate is starting to concern the market for next season’s plantings.
  • EU rapeseed rallied, with February futures trying to climb to levels where November futures left off. Strategie Grains increase EU sunflower seed production by 200,000t to 10.16mln t. Rapeseed production dipped from 17.03mln t to 16.97mln t.
  • UK prices not only benefited from Matif, but sterling fell to 1.17500, which also provided some support. UK prices touched new highs before trading lower in yesterday’s session.

Oats

  • Since our last report, global grain prices continued to trade in an upward trajectory, with London ICE May’22 wheat futures contract trading at a new high on Monday of £231/t (up £7.50 vs last week’s previous high). Prices have fallen slightly since 1 Nov. However oat prices have held this increase in value. Domestic milling oat buyers are largely covered until January, but demand into western Europe remains and this is putting a strong supportive floor into the market.
  • Feed oats are valued at £30-40 discount to milling oats. However domestic supplies are becoming increasingly hard to identify. This could be due to a lack of sellers, but also down to farmers seeing a wide price disparity to feed barley, which is resulting in them feeding the oats to their own livestock rather than selling it into the market. Feed products are exceptionally high, so consumers are looking for the cheapest feedstuffs to keep costs down. Therefore feed oats could be tighter than the S&D may suggest.

Pulses

  • Bean prices are stable on the week and prices are likely to consolidate around these levels in the short term, particularly for feed beans.
  • Buyers in Europe have covered the majority of their nearby requirements and the freight market continues to firm with a lack of availability of vessels, which is keeping a lid on ex farm prices.
  • Human consumption demand to Egypt remains strong, but the lack of availability of containers is restricting the level of exports from the UK.
  • The container liners are still not taking any bookings to Sudan due to the military coup and this is unlikely to be resolved in the short term.
  • Pea buybacks remain available for harvest 2022. Please speak to your farm trader for further information.

Seed

  • Spring seed – New to the portfolio for this spring we have Group 4 WPB Escape, the highest yielding spring wheat currently on the AHDB Recommended list, also with very good disease resistance.
  • Winter seed – We still have some floor stocks of seed suitable for the later drilling window. Including OWBM resistant Group 1 milling wheat RGT Skyfall.
  • Other – Increase yields and reduce risk of environment stress with Tiros, a bacterial seed treatment allowing biological fixation of nitrogen in the crop and enhanced nutrient availability.

Fertiliser

  • Granular urea continues to trade higher as India reportedly secured only 460,000t in its recent tender. Estimates suggest the country needs a further 2mln t by Jan/Feb 2022, so another tender is due imminently.
  • Chinese export curtailments are keeping urea markets firm and recent export restrictions imposed by Russia are tightening supply once again; both countries continue to protect their domestic food supplies.
  • UK AN producer CF issued new prices this week at a significantly lower price than many current imported AN prices. This is likely to be short lived, so any farmers waiting for a “Blue Bag” offer should take advantage of this Nov/Dec offering.
  • Prices are underpinned at these higher levels at present. Current market values compared with cost of production means it makes economic sense to maintain slightly higher levels of production, but supply capacity remains reduced.
  • Selling wheat at current levels to buy fertiliser makes sense for cash flow and hedging risk. Averaging nitrogen prices across the season is important to be able to calculate break-even yield and may give room for justifying further nitrogen fertiliser purchases at these higher levels if gross margin calculations permit.
£/€ £/$ €/$
1.18 1.3635 1.1555
Feed Barley £ Wheat £ Beans £ Oilseed Rape £
Nov21 200-210 210-220 250-255 582-587
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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