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Thursday 6 May 2021
- Corn remains the driver for the global wheat market and the past week has been dominated by weather concerns, mainly in Brazil where continued dryness is affecting the country’s second corn crop.
- Crop estimates are rapidly declining and, with no rain expected for Brazil over the coming weeks, the impact of the smaller crop is seen pushing export demand back to US corn.
- This would severely tighten the US balance sheet, especially with continued export demand seen from China, supporting higher corn prices and dragging global wheat values upwards.
- Although wheat crops in parts of the southern and northern plains of the US have received rains, the forecast of drier conditions returning has added support, along with the extremely dry and cooler conditions in Canada.
- US wheat prices are completely uncompetitive on the export market, but at present it’s all about corn and Brazil. EU (Baltic) and Black Sea prices remain the cheapest wheat in the world, and at between $35-$50/t discount to US wheat there is little reason for them to go lower.
- EU and UK old prices have remained steady, with UK new crop down £2 on the week, despite the Chicago-based rally. Recent rains would have been welcomed for crops, although more is needed, along with some sunshine and warmth to enhance yield potential.
- New crop prices remain attractive for growers, in the £180 to £190 price range ex-farm for early in the new crop marketing season, but that does not mean markets cannot retest the recent highs.
- Most of Europe has received much needed rain and there is more in the forecast.
- UK beer sales keep increasing and are expected to return close to normal when the pubs are fully opened later this month.
- Malting barley prices and premiums remain attractive, underpinned by strong demand and firm feed markets.
- Please contact your local ADM Agriculture farm trader for a variety of contract options, including pool, non-replacement, feed plus premiums and premium to wheat futures.
- Old crop barley remains elusive and supply is extremely difficult to find. Markets are supported again as a result and currently show no signs of lying down.
- Welcome rains over the weekend have provided some relief to the trade, which was becoming concerned about the condition of the spring crop due to recent dry weather. With an improved forecast as well, barley has widened its discount to wheat although flat prices continue to move higher driven by the bullish macro-picture in the wider grain markets. Origination is still very slow on new crop positions, with many growers waiting to see how the crops develop over the coming weeks.
- Fundamentally, the market is still looking bullish due to continuing global weather issues and strong consumer demand.
- Brazil has expanded its near-zero rainfall area, which almost guarantees that further downgrades are going to be expected for the country’s corn crop. The US weather forecast continues to show rain for the East Midwest, Delta and south east into mid-May, but the Plains, West Midwest and Dakotas are still dry for the foreseeable future, which will continue to draw on soil moisture levels, despite the temperature being well below normal.
- Soybean planting is carrying on at a rate of knots in the US, with 24% of the planned area planted compared with the five-year average of 11%. Topsoil moisture is 63% adequate/surplus compared with 80%, the year-on-year average. Next week’s USDA report may even add some soybean acres to their previous estimate.
- Despite this, weather continues to dominate market sentiment. Chicago soybeans started the week off strongly and made big gains this morning (Thursday), suggesting $16/bushel could be on the cards in the near future.
- Asian markets have been quiet this week, with China being on holiday. However, they opened sharply higher this morning and nearby Malaysian palm oil hit a record high. Demand remains strong, but also May is a short production month and manpower for harvesting remains a challenge. Global usage of veg-oils in the energy market is only set to continue with various countries now targeting a reduction in fossil fuel consumption.
- Matif has hit three straight day highs this week, with Aug 21 values opening today more than €23 up on last Fridays’ close, at €527.75.
- And in Canada, the market is only $40 off $1,000. It is still mainly a weather story, but with Canada still cold and dry, there is a chance these could head even higher.
- Sterling has had some small gains this week. However, today’s election results, as well as Bank of England policy decisions, will be critical for what happens to sterling going forward. UK new crop prices are as high as many can remember, approaching £460/t delivered to crush for the first time this season – for good reasons.
- Demand for old crop beans remains subdued, with demand limited to merchant shorts and very few new enquiries from consumers. With reasonable volumes still coming forward from farm, old crop prices are struggling to move higher in line with other commodities.
- This weeks’ rainfall has provided some welcome relief to spring pulse crops and we have seen some farmer selling as a result. New crop bean prices continue to follow London wheat futures and prices are therefore firmer week on week. Future price direction will likely continue to follow wheat futures in the short to medium term.
- Looking ahead to the autumn season, ADM Agriculture has a great portfolio, with something to fit every situation.
- If you are looking for an early drilled wheat after OSR or fallow, we have short and stiff KWS Parkin which excels in the early drilled spot, with early maturity to spread the harvest workload.
- On the other end of the spectrum, we have extremely vigorous KWS Cranium. This variety really stands out in later-drilled slots after root crops. Not to be pigeon-holed as a late driller, KWS Cranium is also a very strong performer in the main drilling window, offering flexibility on farm.
- ADM Agriculture also has over-yeared stocks of high yielding SY Baracooda hybrid barley, ready to be treated for pre-harvest delivery onto farm.
- North and South American destinations are offering the best returns for most global traders of urea, with demand rising year on year.
- The Indian tender saw offers of 2mln t. A significant tonnage is expected to be sourced from China, which is supportive of current prices for the next month.
- UK producer CF is increasing ammonium nitrate and nitrogen/sulphur prices. Strong demand and limited corrections in the European market, as well as supported global urea values, are keeping prices higher than last year.
- AN, N/S and NPKS are firm as we approach the new season with higher raw material costs in comparison to last year, most notably in natural gas.
- Freight rates for new cargoes into the UK are around $15-25/t higher than last year, impacting any imported product pricing at present.
- Phosphate and potash prices are stable to firm ahead of autumn demand.
|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.