Thursday 17 October 2024

Wheat

• US prices have fallen $5.14/t w/w as the market largely shrugged off the Russian export meeting and the WASDE report released last week.
• US exports again were no better than routine, at 371kmt. However, they are still reported as reaching 8.98mln t a/o 10^th October, 33% ahead y/y, and 40% of the current yearly projection. While the market was a bit surprised that the export number wasn’t increased last week, some tinkering with production, and domestic numbers, produced a slight reduction in US ending stocks.
• Comparatively, EU prices are down just €1.00/t w/w, as the market digested the Russian export news. The result of the meeting was a rise in the export tax duty (by around $5.50/t) and comments from the Ag Ministry, that exporters shouldn’t sell below the $250/t FOB floor price – two factors that would ordinarily be bullish. While this was aimed at open market tenders, it is envisaged that if government-to-government trade, especially to a key destination, the rules may become a bit more flexible as we’ve seen in years gone by.
• European markets gained a glimmer of support from the likelihood that the ECB will again trim interest rates, resulting in a sharp decline in the euro which is underpinning MATIF. However, EU export prospects remain undermined by aggressive Black Sea export prices, despite the duty hike, and were reported to be down 29% y/y at 6.94mln t. Adverse weather in France continues to disrupt farmer land-work, with the corn harvest progressing at the slowest pace in 11 years, with only a 6% cut, while only 6% of the soft-wheat crop was planted a/o Monday, well below the 5-yr average.
• UK prices are down £1.90/t w/w, as growers continue to focus on crop planting rather than grain marketing. The AHDB released their provisional 2024 UK wheat harvest, and at 11.1mln t is about 2.9mln t lower y/y. The wet weather through last Autumn and winter, and into the spring, has resulted in lower wheat sowings and impacted early crop development, leading to crop losses. This should support another heavy seasonal import program, already reported as reaching 608kmt a/o the end of August, almost 2½ times greater than a year ago.
• In summary, the Russian meeting came and went, the WASDE report came and went, and nothing bullish came from either. Russia may now be working with an ‘export floor price’, but that remains hypothetical depending on who comes knocking at Russia’s door! The market may continue to drift, but with lower crops, and less pressure on farmers to store them, the focus will remain on the pace of winter sowings in the northern, and crop potentials in the southern hemispheres.

Feed Barley

• Another week passed and we saw no discernible increase in farmer selling, which remains at a baseline. Demand continues to be relatively strong in domestic markets where barley is still trading at competitive levels. As a result, prices remain supported, although when we see an upside in futures, the failure of barley to follow 1:1 demonstrates the effect of the heavy S&D.
• Export demand is again slow, and old crop shipments to Europe are up just 15Kmt on the week, which is 70% down year-on-year. We still see a total void in demand for UK exports heading later into the season.

Malting Barley

• Similarly to the feed barley market, malting markets have been quiet for another week. Farmer selling is slow, and growers are unwilling to lock into premiums at multi-year lows. This is true both in the UK and across mainland Europe.
• Demand remains elusive and we see no significant interest from consumers. Anecdotally, there is still demand to be covered for Q1 and Q2, and the question for the market will be whether farmer selling will eventually improve, otherwise, we could see premiums firm to bring some liquidity back to what is a very thin market.

Rapeseed

• CBOT soybeans declined this week, primarily due to favorable harvest conditions in the U.S. and improved soil moisture levels in South America. In The U.S., this week’s crop progress report gave a 20% increase from last week’s 47%, to 67% complete, as recent weather has been ideal to let farmers get out in the field. Last week’s USDA WASDE report didn’t give us any market-moving numbers with soybean revisions largely unchanged in line with expectations. This did leave production at a record 4.58 billion bushels, 120 million higher than the previous high in 2021. NOPA’s crush figures for September came in at a monthly record of 177.32 million bushels, compared to guesses of 170.3 and well above August’s 158.008.
• In South America, CONAB released their first official estimate for new crop Brazil production at 166.05mln t, well above the 147.38 we saw last year. Planted area is up 2.8%. AgRural has reported Brazil bean planting is 8.2% complete vs 17% last year. Brazil and Argentina expect rain in the next 10 days as the monsoon season kicks off. LSEG has stated that Argentina’s shift from corn to soybeans is expected to increase production to 50.7mln t, a 5.4% increase year-on-year.
• Crude oil has continued to fall back from highs this week as worries surrounding potential escalation in the Middle East are fading, though still there. We have also seen pressure from the fact that hurricane damage will reduce upcoming demand. China has said that the government may raise 6 trillion yuan from special treasury bonds over three years to stimulate their economy. China imported 45.49mln t of oil in September, 0.6% lower than a year earlier, giving us the fifth month of shipments that were less than the year before. Year-to-date imports are 2.8% down. India’s Russian oil imports are up 11.7% in September from August, accounting for about two-fifths of the nation’s monthly imports.
• Canola markets have been relatively quiet this week with Canadian Thanksgiving on Monday. Last week speculative shorts continued to reduce their position by 32,000 contracts and now represent 37% of the entire position. Funds represent just under 50% of the market short open interest. Both crush and weekly export disposals continue to run at record levels so far with a combined usage for the current crop year of 4mln t vs the previous high of 3.65mln t in 21/22.
• MATIF rapeseed has followed the wider complex lower this week, although within the recent uptrend. We are yet to break through the key level at €505. EU crop production continues to slip with the French Farm Ministry dropping their estimate to 3.85mln t from their previously reduced 3.95mln t. The EU farmer seems reluctant to sell, although, with coverage good pre-Christmas, the focus will be filling gaps in the new year.

Oats

• European oat markets continue to see support thanks to buying interest from consumers after they secure forward milling contracts.
• Prices have rallied in Scandinavia thanks to this flow of demand, and with harvest now over, there is a lack of fresh tonnages coming onto the market.
• Coverage for some millers is good, but there are also some gaps to fill, which could help support prices for the short term.
• Here in the UK, farmer selling has reduced significantly with growers focussing on drilling and land work. 
• Demand for the UK millers is focussed on Q1-Q2 positions, therefore farmers needing spot movement may struggle.
• Ergot continues to be a problem with many crops being delivered. However, the end buyers are trying to do what they can to accommodate things.
• Feed oat demand remains non-existent in the UK, but given the lack of feed quality, this is not a problem.
• Bottom line, prices have been supported by recent buying over the last few weeks, but have we hit the season low? Time will tell.

Pulses

• As we pass the middle of October, we are finally starting to see the last of the UK bean harvest lurch into life across the northern half of the UK. Reports on moisture vary, although the quality does seem to be intact. There has been limited domestic interest across the compounding industry, with various bits trading across the UK, although interest is still primarily focussed around the nearby positions. We also continue to see human consumption interest in exports, primarily to Egypt. By and large, the pressure remains on the front end, keeping prices suppressed, and is only likely to continue as the harvest pressure finally starts to build.
• In the week ahead, the UK is forecast to see further rainfall, albeit lighter than in recent weeks. Temperatures are a little above average for this time of year, so will help with the drilling campaign. Turning to the rest of Europe, everyone is set for similar amounts of rainfall, although Italy and France will buck the trend and see significant levels of rainfall. The wetter conditions we are facing here in the UK are presenting challenging harvest conditions, with some beans reportedly coming off in excess of 30% moisture in places… the one bit that we can all agree on is there will definitely be a requirement for drying!
• Despite the weather, UK beans remain upbeat in terms of quality basis what we’re seeing through the lab samples. Additional premiums are available for growers with good-quality beans, so it is worth regularly talking to your farm trader and pushing samples across if they look like they have potential, as we may be able to upgrade them for you and pay an additional premium if they hit spec. Feed beans are still on the wrong side of the equation for general compound use for the most part, with them needing to come c. £15/mt relative to other commodities, especially with the recent easing in rapemeal values. As written in previous reports, with all this factored in, feed is only likely to come under further pressure and be squeezed lower.
• The winter drilling season for beans is rapidly approaching, so it is worth making time to talk to your farm trading representative during the weather stoppages, as they will be more than happy to advise you on what contracts we have available. With a combination of great marketing options, various seed stocks ready to go, and a portfolio of cost-effective inputs, such as P-Grow and FibroPhos that can help push your yield potential, they are ready and happy to help. We are buyers across a wide spread of homes nationally and can offer you competitive origination markets, plus the opportunity to upgrade any crops that may be fit to human consumption pulses to be processed in one of the most advanced pulse processing plants in the UK and Europe, all while earning an additional premium for your crops.
• Finally, the ever-present PGRO plug to those eligible to be members. If you are not already signed up to the PGRO mailing list, you can sign up here where levy payers can access all sorts of advice and support, tapping into their extensive knowledge bank on all things pulses for free!

Seed

• Improved weather conditions in the UK have created an opportunity to resume drilling after prolonged heavy rainfall. We have floor stocks of Champion, KWS Dawsum, KWS Extase, KWS Ultimatum, and LG Beowulf.
• We also have spring wheat available for those thinking ahead. Thoughts are switching towards the spring market with interest in spring barley, spring wheat & spring oats. We have a wide portfolio of products to offer with buyback contracts available at this time. Please contact your local ADM Agriculture farm trader for further information and requirements.
• Are you signed up for the SFI cover cropping scheme? Or perhaps looking for winter cover? We have a variety of mixtures available plus the option of bespoke mixes tailored to your requirements. Speak to your farm trader today for more information.

Fertiliser

• Market Overview: The macroeconomic environment continues to exert significant influence across the fertiliser markets. Traders remain vigilant, particularly given the ongoing geopolitical tensions in the Middle East, which have escalated over the past few days.
• The Middle East accounted for 19% of the world’s phosphate exports, 35% of global urea exports, 19% of ammoniacal nitrogen, and 10% of potash in 2022. Further disruptions in this region could substantially impact global supply chains.
• Currency fluctuations have the potential to be pivotal for UK import pricing, as the strengthening pound has increased import capacity. The pound has dropped below 1.3 against the USD, marking its lowest since August 19. This drop is attributed to the UK’s inflation rate slowing more than expected, reinforcing prospects for further rate cuts by the Bank of England. The annual inflation rate has decelerated to 1.7%, the lowest since April 2021, compared to forecasts of 1.9%.
• European Natural Gas futures fell below €40 per megawatt-hour, down from a 10-month high of €41 on October 7, driven by increased supply and unseasonably mild weather. LNG imports to northwest Europe hit their highest levels since April, with several vessels diverted from Asia due to Europe’s recent elevated gas prices. While mild weather is expected to reduce heating demand in the short term, long-term forecasts suggest a colder-than-usual start to November. Despite European gas storage being 95% full, which is above average, it is still 6 billion cubic meters lower than the levels seen in 2023 due to reduced LNG reserves. Traders are keeping a close watch on Middle Eastern tensions.
• Urea Market: Urea markets have observed significant price increases, with European paper markets indicating prices around $435/tonne CIF into the UK—a 12.9% rise since mid-September. The market remains sensitive to ongoing threats surrounding Iranian urea exports, which account for 25% of the Middle East’s total urea exports. India is rumoured to be re-entering the market next week after their 2.57 Mt tender issued on October 3rd for mid-November shipment, of which only 0.56 Mt was secured. This has compounded the upward price pressure in recent weeks, with India’s return expected to further support the market as we move into late Q4.
• Meanwhile, China’s brief bullish momentum has reversed, with prices weakening again this week after earlier speculative trading on falsified reports of changes to Chinese Urea export restrictions. Chinese urea producers’ inventories have grown, now exceeding 1.12 Mt as of October 16th. The Chinese market remains an outlier, with Urea ex-Middle East seeing transactions at mid-$390/tonne levels, while net highs for the RCF Indian tender were estimated at $370/tonne just a week earlier.
• In the UK, major suppliers have temporarily withdrawn public price quotes to reassess their pricing strategies, given rising CIF prices and the strong USD. Current CIF values for UK imports are now surpassing $430/tonne, which translates to a replacement cost to growers of approximately £390/tonne once logistical and handling costs are factored in.
• Ammonia Market: Ammonia markets continue to face considerable supply-side risk, with European production constrained at 70-80% of capacity. Limited availability in October has driven traders to explore alternative sources from the Middle East and the U.S., as prices in Europe remain elevated. While recent corrections in gas prices may ease some upward pressure, supply concerns persist due to geopolitical instability in key gas-producing regions.
• CF Industries’ decision to withdraw their Nitram offer last Wednesday led to heightened buying activity, with the revised CF offer reflecting broader market sentiment. Smaller-than-expected gas price corrections have also influenced final ammonia pricing levels.
• Potash Market: The Potash market remains characterized by low demand and stable pricing since June, a trend supported by the US’s 12% year-on-year reduction in imports from January to August 2023. Global sentiment mirrors this dynamic, with the exception of Southeast Asia, where markets have rallied on the back of stronger palm oil prices. Despite subdued activity, there is potential for renewed buyer interest if prices soften further. While geopolitical risks are being monitored, there is no immediate expectation of market disruption. Downward price pressure may ease in Q4 if demand strengthens, and supply chains remain stable.
• Phosphate Market: Phosphate prices have faced some downward pressure this week, despite tight global supply. Demand remains muted, but prices are buoyed by China’s inability to fully meet India’s DAP demand, following the August 2024 export suspension. Market activity slowed during China’s Golden Week holiday, and the ongoing Middle Eastern conflict has yet to influence price levels. European suppliers are maintaining prices, despite low liquidity in the physical market.
• Market Sentiment: The overall sentiment across fertiliser markets is cautiously bullish for Q4, driven by strong urea and ammonia price dynamics and persistent geopolitical risks. However, key markets such as potash and phosphate are showing signs of subdued demand, with the potential for an uptick if prices soften further.
• Market Outlook: In the coming months, the markets are expected to remain volatile, particularly in response to the evolving geopolitical situation in the Middle East and potential supply chain disruptions. Urea markets, in particular, may continue to see price increases as India re-enters the market, while tight ammonia supply is likely to support elevated prices despite recent corrections in gas futures. The potash and phosphate markets may see renewed interest toward the end of Q4 if prices drop and demand strengthens. Geopolitical factors, currency movements, and natural gas prices will remain critical variables shaping market dynamics.

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.