Thursday 10 October 2024

Wheat

• US prices have fallen $5.97/t w/, as markets ‘banked’ profit from the recent sharp price hike.
• Markets have weakened over the past week, despite ongoing tension in the Black Sea and Middle East regions, global weather concerns, and potential export intervention by the Russian government.
• US exports slowed last week, albeit still running 35% ahead y/y, and currently at almost 40% of the yearly projection. In this week’s WASDE report, the likelihood is that US exports will be pushed higher, by at least 25mln bushels, and given the expectation is for little, or no change in the other numbers, the higher exports will project a similar decline in closing stocks, albeit still seen at 10-15% higher y/y and their highest for four seasons.
• European markets have followed, trading down €5.00/t w/w. Unlike the activity in the US, EU exporters can’t sell grain, as the recent firmer Black Sea export prices were negated by parallel moves in EU/US markets, keeping the origin’s competitiveness unchanged. Recent tenders by Saudi and Algeria are likely to be heavily Russian-based, and with Egypt also agreeing on a long-term buying deal, opportunities for EU exports remain limited, especially with the news that Algeria would bar any companies offering French-origin wheat, a similar move they undertook three years ago.
• In its recent release, Strategie Grains kept its EU 2024/25 soft wheat production at 114.4mlnt, down from 127.1mln t y/y, but closing stocks were seen rising slightly to 10.3mln t, mainly due to lower exports.
• Following the rumours that surfaced last week, the Russian Ag Ministry has called for an emergency meeting of grain exports tomorrow to discuss potential export restrictions. Russia’s Government has been less than active in discussing new crop prospects, but any export intervention would support that current dryness, and crop potential concerns, are justified.  
• UK prices are also lower, but only by £1.65/t w/w. As growers continue to concentrate on fieldwork and winter cereal sowings, supplies of physical grains remain limited, which has allowed delivery premiums to rise. The carry in the market provides a ‘big number’ in the more deferred position, and while more attractive to growers, it exacerbates the supply tightness in the spot market.
• In summary, tomorrow’s meeting to discuss Russian exports could be a major game-changer. However, as seen before, rules for day-to-day export trades, and what is allowed government-to-government may be completely different, but any restriction will lend support to the market, and overshadow what could be a lacklustre WASDE release!

Malting Barley

• Malting barley markets are still quiet, and there is little activity to report. Farmer selling is slow across Europe on low-quality premiums, meanwhile, demand continues to sit on the sidelines, however, enquiries are picking up from continental buyers which gives some hope for prices. If we see demand come into buying Q1 and Q2 positions, we are likely to see some upside while the grain complex remains buoyant and premiums at recent lows.

Feed Barley

• Feed barley has struggled to keep pace with buoyant wheat markets over the last week, as the UK’s barley surplus starts to weigh on values. First-hand demand is rather elusive with nearby coverage looking healthy.
• For another week, we lack competitiveness in export markets, although there is little demand to report anyway. We maintain the view that UK feed barley needs to push harder to compete in export markets or buy an additional tranche of domestic demand.

Rapeseed

• It has been another choppy week for ag markets, with soybeans attempting to find support after breaking the uptrend. We have seen some further export announcements from the USDA, however prices have been pressured by favourable weather conditions in North and South America. In the U.S. soybean harvest continues to advance with dryness in the forecast. Early cut crops did come in with some high moisture although this has become less of an issue. In South America, Brazil has some much-needed precipitation in the forecast to help soil moisture levels and progress plantings. Argentina also saw favourable rains helping the soil moisture levels. Farmer selling in the US is thought to be around 20-25% for both beans and corn though selling has died off since prices have fallen back.
• Energy markets have reached a high and seen a sharp selloff on rumours of cease-fire talks in the Middle East. There are still concerns that Israel may attack Iranian oil infrastructure though this is still very uncertain. Iran is a member of OPEC+ and accounts for around 3% of the group’s output, however, they do have enough spare capacity to offset any disruption. This week’s API report showed crude stocks rising 10.96 million barrels last week, well above expectations.
• Canola prices have also seen some pressure this week from profit-taking and farmer selling following 6 consecutive days higher. The MATIF/Canola spread has started to widen again after reaching nearby lows showing that MATIF levels still need to try and attract further Canadian imports. Despite seeing disruptions in railway transportation and loading of vessels, canola exports for the first two months of the crop year have set a historical pace at 1.763mln t, 325% of the 3-year average. Chinese margins look very positive utilising Canadian canola so we may see them step in for additional coverage.
• MATIF rapeseed prices have seen a small pullback this week but remain within the recent uptrend in line with seasonality. Overall markets are likely to be quiet ahead of this week’s USDA report in case of any major surprises but for now, the momentum is positive. That being said we are approaching previous highs so we may need some help to push much further.

Seed

• With a fair amount of drilling still to be done across the UK, should the weather allow, we have floor stocks ready to roll of Group 1 varieties Crusoe, SY Cheer, Group 2 KWS Palladium, KWS Ultimatum & KWS Extase, Group 3 Bamford and in the Group 4s, SY Insitor, KWS Dawsum, Champion plus odd bits of LG Beowulf.
• With spring just around the corner, we are pleased to offer a wide portfolio of spring crops including spring barley, spring wheat, spring peas and spring beans. Along with the offer of seed for the spring, please talk to your local farm trader regarding some very attractive buy-back contracts we have available at this time.
• Check out our YouTube video on spring barley to find out more about the specific varieties we have to offer.
• Looking for a short-term grass ley? Westerwolds are a great option for producing large amounts of biomass in a short space of time. Whether you need it for silage, hay, grazing or green manure, westerwolds is the choice.

Fertiliser

• Over the past two weeks, macroeconomic factors have significantly influenced the markets, with geopolitical tensions causing notable movements, particularly in the nitrogen sector. The U.S. dollar has also experienced a rebound from recent lows, adding complexity to the current market landscape.
• UK Natural Gas futures recently surpassed £1/thm, reaching levels not seen since December 2023. This surge is primarily attributed to ongoing geopolitical tensions and revisions to Norwegian gas maintenance schedules. While European gas storage levels remain robust and imports are strengthening, potential supply disruptions continue to pose a risk. Notably, Israel briefly halted gas production at the Tamar and Leviathan fields, threatening 1.7% of global supply, production has since resumed. The market outlook has slightly improved due to greater domestic generation and high storage levels bringing Natural Gas futures back down to 0.96p/thm at the time of writing. It is important to note geopolitical threats remain an overarching concern.
• The urea market has seen activity, with physical markets out of Egypt trading as high as $407/mt, marking a 13% increase since late September. Global buyers are particularly concerned about Iranian urea exports, which account for approximately 25% of the Middle East’s total urea exports. India’s recent tender for 2.57 million tonnes, scheduled for mid-November shipment, has added pressure to the market. It is expected that India has been unable to secure the required volumes at acceptable levels indicating a further tender in Q4 potentially providing support to the market later in the year. In Brazil, sellers are attempting to raise granular urea prices to the $395-$400 range, but buyers are hesitant at this stage. Urea ex NOLA has seen a correction of $3/Tonne following a $30/tonne surge over the past two weeks. In the UK, major urea suppliers have withdrawn from the market to reassess pricing strategies amid significant increases in CIF urea prices and a strengthening U.S. dollar.
• Ammonia markets have faced notable supply risks. European production remains curtailed at 70-80%, and limited October supply prompted traders to explore alternative sources from the Middle East and the U.S. to take advantage of European price premiums. While recent alleviations in gas prices may mitigate some upside risk, supply concerns remain due to ongoing geopolitical tensions and production limitations.
• CF Industries withdrew their Nitram offer at noon on Wednesday, concerns of price rises upon re-entry to the market prompted increased buying activity earlier in the week bringing participants to the market in all key Nitrogen markets. CF UK has reissued this morning at a £10 premium on previous levels.
• The potash market remains stagnant, characterised by limited global demand and stable prices since June. Subdued demand continues to suppress market activity. However, there is an expectation that buyer interest may revive if prices weaken further, assuming current market sentiments persist. Traders are monitoring geopolitical developments, but any immediate market impact appears unlikely. As participants re-engage later in the fourth quarter, downward price pressures may diminish, provided there are no disruptions to Middle Eastern supply.
• Phosphate prices have remained steady. Global supply is tight but continues to exceed the limited demand. The recent Golden Week in China curtailed market activity in the East, and the ongoing Middle Eastern conflict has not influenced price points. China’s firm stance on not fully meeting India’s DAP demand is expected to keep Eastern prices stable. In Europe, suppliers are maintaining prices despite limited liquidity entering the physical market.
• Growers are currently focused on weather-related challenges affecting drilling campaigns. However, it is advisable to consider the potential for rapid shifts in global fertiliser markets due to international trade dynamics. In the nitrogen markets, ensuring security of supply heading into spring could be prudent. Breakeven ratios offer a slight positive margin in a volatile commodity market. For context, with an ex-farm feed wheat price of £200 per tonne, the breakeven ratios for ammonium nitrate (AN) and urea are approximately 4.8 and 4.1, respectively, based on current UK spot prices.

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.”

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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.