Market Report

Thursday 9 September 2021

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In today’s update we take a look at the grain market from a technical point of view.

 

Wheat

  • The fallout from Hurricane Ida which ripped through the US Gulf Coast has kept US markets on the defensive as spring crop harvests approach.
  • The storm caused flooding, power loss and damage to the US export infrastructure. The resulting slowing of shipments from the region, together with a potential surge in global covid levels and talk of slowing Chinese import demand, may keep markets on the defensive in the short term.
  • The return of rains to the US Midwest has also added to the bearish tone as long-holders started liquidating their positions that were built up during the prolonged drought across key crop areas of North America.
  • However, the long-term scenario remains supported, with tightening global stocks.
  • Looking at areas in more detail, Australia’s research bureau ABARES has increased its estimate of the country’s 2021 wheat crop to 32.6mln t, compared with vs 33.3mln t this time last year.
  • Recent rains have also replenished wheat fields across much of Argentina’s grain belt.
  • Canada has turned wetter, too late to boost the wheat crop (reported at a 14-year low of 23mln t) but on time to disrupt harvest and increase quality concerns.
  • Over much of the eastern EU and in southern Russia rain is needed to establish winter crops, although Ukraine has seen more favourable conditions.
  • Ukraine continues to push grain exports, which have risen 14% so far this year to 9.1mln t. including nearly 5mln t of wheat. Egypt’s state buyer (GASC) purchased 300,000t of Russian/Ukrainian wheat in its latest international tender.
  • However, Russian wheat yields continue to decline, reported at 2.94t/ha compared with last year’s 3.3t/ha. Wheat exports are put at 5.8mln t, down 18%.
  • China’s market information service CNGOIC has cut its domestic corn demand to 276mln t, which would be 20mln t lower on the year.
  • Latest crop data shows that only about 30% of French soft-wheat analysed has achieved the minimum milling 76kg/hl specification.
  • The UK harvest is entering its final stages, although high moistures and variable quality is slowing down movement and there is limited consumer demand. Total crop estimate is uncertain but it looks like the crop will fall below 15mln t.
  • Lower kill rates in pig and poultry processors is being reported. This is mainly due apparently to staff shortages rather than lower demand.
  • USDA will release its latest global supply and demand estimates tomorrow. With little change expected for global wheat inventories, the focus again will be on corn (maize) area and yield to provide the next directional movement for wheat.

Malting Barley

  • The EU spring barley harvest is mainly in the barn.
  • Yields are not as good as expected and quality is variable.
  • Prices remain well supported.
  • The UK has produced a surprisingly good spring barley crop.
  • Yields are slightly above average, with bold barley and low nitrogen.
  • Moistures are higher than normal, but the percentage that is available for malting is over 75%. Much higher than normal.
  • A pass rate of 75% would give the UK an exportable surplus of 800,000t of malting barley.

Feed Barley

  • Feed barley prices have drifted sideways on the week despite wider markets coming under pressure.
  • UK prices are once again supported by nearby shorts, and whilst origination is picking up, many domestic consumers still have supplies to cover and feed barley is not flowing freely.
  • As a result, the spread between wheat and barley has narrowed significantly, and barley prices look unattractive for feed compounders vs wheat going into the winter. We expect to see feed demand adjust accordingly.
  • Demand for exports is also extremely thin and current UK prices are uncompetitive into nearby EU destinations.
  • We have seen some international tender enquiries over the week from Turkey, Algeria and Tunisia, which have traded/will likely trade ex Black Sea, where barley is most competitive into these destinations. As a result, we should see little knock-on effect in the northern EU market.

Rapeseed

  • CBOT soybean prices have been mixed this week. The market felt supported at the start of the week following recent Chinese purchases, but there are concerns that the Gulf exports may be delayed due to the damage caused by the recent hurricane.
  • US weather remains dry for the next week with temperatures above normal. This week’s crop ratings showed a 1% increase to 57% good/excellent (65% last year).
  • South American markets remain quiet. Brazil has reduced its biofuel mandate to 10% from 13% and Argentina reduced its level to 9%.
  • Canadian canola prices tried to rally, but have struggled to hold on to gains as the week went on. Weather forecasts are now showing rain in the next week, which won’t be welcome with harvest coming.
  • For the time being prices may have done enough to ration demand (or things are just taking a breather) before Friday’s USDA report. A private Reuters survey pegs average trade estimates for Canada’s ending stocks for 20/21 at 1.2mln t. Stats Can released stock estimates were reported at 1.8mln t, much higher than estimated.
  • The Australian canola crop is now estimated to be 5.03mln t compared with the 4.2mln t estimated by ABARES in June.
  • EU rapeseed prices broke out of the recent range to touch new contract highs in yesterday’s session. Strategy Grains cut its EU crop estimates down 100,000t from 17.03mln t to 16.93mln t. All eyes will be on the USDA WASDE report at the end of the week.
  • UK prices remain close to season highs with sterling now trading at the lower end of its recent range.

Oats

  • UK oats remain very competitive into Europe, however the delayed UK harvest and unknown quality is causing a lack of selling confidence. Consequentially, buyers are not bidding into a void and sellers are not offering. Demand for OND’21 feed oat into Europe remains present, but milling buyers are more keen to buy the deferred positions. UK harvest has progressed well over the last week with estimates ranging from 50-70% complete depending on area. Given the good weather we should expect harvest to be near complete by the end of the week, weather permitting. Domestic millers remain buyers in the spot position, however a lack of haulage is causing supply issues.
  • Winter oat quality is maintaining an average of 50.4kg/hl and <4% screenings, however the springs are slightly down on last week with specific weight falling to 47.4kg/hl vs 47.8kg/hl last week. With the increase in harvest progress we hope to see a lot more samples in the next week or two.
  • Export buyers into Europe remain keen for offers of min 52kg/hl oats, with prices expected to be higher than previous trades .
  • Bottom line, we need a greater understanding of our quality before we can market our surplus.

Seed

  • Winter Wheat: Barn filler SY Insitor is having another great year in trials with really good septoria resistance and very impressive yields.
  • Winter Barley: Seed is beginning to become limited, but we have good availability of Valerie. Valerie has superb grain quality with big, bold grains, with a high TGW and the lowest screening losses on the winter barley RL.
  • Rapeseed: It’s not too late to order OSR. We have two extremely vigorous varieties that will excel in the later-drilled spot. Duplo and LG Aviron are both in the top three for vigour in this year’s AHDB trials and are loaded with traits, including TuYV, pod shatter and RLM7.
  • Other: Don’t forget ADM Agriculture can cover all of your stewardship and cover crop needs. Get in touch with your farm trader with any enquiries.
  • Click here for our 2021/22 seed varieties guide.

Fertiliser

  • Granular urea prices have now moved to a nine-year high in the US. Freight issues have caused shipping delays with serious concerns about timely interior distribution in the aftermath of Hurricane Ida.
  • India has still to tender, but it will arrive soon as the country has 5mln t to buy between now and February.
  • For previous UK campaigns we have always had the option to ship urea from Algeria. However, following Brexit, we have no agreement in place with the country, so now we only really have Egypt as an option in North Africa.
  • Prices there have moved up by over $30t this week, as buyers return in Europe and South America.
  • Freight is also proving to be a major concern. Last year ADM Agriculture was quoted $23/24/t to ship product from Egypt to Immingham. Today it’s nearer to $60/t.
  • AN producers across Europe are now having to pay record prices for gas, the main feedstock. Gas as per a unit of energy is now more than oil for the first time.
  • CF has been sitting out of the UK market for almost a week. They and other producers have major concerns about gas storage. If we were to see a cold spell in Nov/Dec the fear is gas prices could yet spike a lot higher.
  • The whole nitrogen complex looks well supported and many areas still have a huge volume to buy.
£/€ £/$ €/$
1.168 1.3815 1.183
Feed Barley £ Wheat £ Beans £ Oilseed Rape £
Sept21 170-178 176-186 222-227 490-495
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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