Market Report 18th September 2014

Russia on track to harvest second-largest grain crop in post-Soviet history and the largest for six years.

Ukraine’s grain exports jump to 7mln t so far this season. 

Ukraine’s grain stocks reported at 23.4mln t a/o 1 Sept – up 15% y/y.

Egypt’s GASC purchases 180,000t of French wheat for 11-20 Oct shipment - wins order with a competitive price.

French wheat is seen missing out on Algerian trade, more likely to be northern European / Baltic countries.

Australian ABARE cuts wheat export forecast to a 5-yr low at 18.1mln t – reduced domestic harvest and lower Chinese requirements.

Talk of early frosts seen as a potential risk to North American crops

 

Wheat prices have fallen to a fresh four-year low on weak US export prospects and rising global supplies. The bearish stocks outlook in last week’s USDA report has followed through this week, as traders digest the glut of coarse grains available in the 2014/15 season. Although we have seen a spate of recent buying from key importing nations (Algeria, Saudi Arabia and Egypt) this has does little to stimulate the futures markets, nor has it encouraged market shorts to trim their market exposure.

EU prices have been pressured by the apparent build-up in supplies, forcing one EURONEXT silo to stop intake against MATIF contracts. A 400,000t purchase by Algeria (traditionally a key French destination) was reported as being likely to be sourced from northern European/Baltic sea countries rather than France, due to harvest quality problems, and may partly explain the apparent ‘bargain’ price from France to secure the Egyptian business.

The UK is experiencing signs of a ‘supply squeeze’ as a pick-up in demand has been met by a lack of supply. Growers who have, in some cases, just finished harvesting are preparing land prior to sowing for the 2015/16 crop. In addition, recently harvested crops are more than likely above moisture intake criteria and need drying further before being released from farm. This squeeze has allowed spot premiums to increase, but in general end-user demand remains lacklustre. July saw the UK become a net wheat importer for the 26th successive month, although after what should be a good quality harvest, and a likely record yield, this trend is unlikely to continue.

In summary, comments and market sentiment remains the same – bearish. There is a lot of wheat looking for homes, with the overhanging pressure of a record corn crop looming. Global bullish arguments are outweighed by bearish factors. The EU still has a quality issue – who has got what quality and where will it go? In addition the UK is still heavily oversupplied – although one crumb of comfort may come from the FOREX markets in the unlikely event that our Scottish friends show they have lost all touch with reality and the Scottish independence vote goes the wrong way for the financial sector!

                   

A quiet trading week with fewer oat offers from the farm as storage pressure reduces.

Prices are now stuck in a range, which in the short term will suit the oat millers as they work through existing stocks.

Longer term, the market will need an export market to help clear the decks.

                   

• Wet beans seems to be the main problem this harvest - export contracts are sold at max 15% so drying is essential.
• The market is virtually unchanged, with only merchant shorts supporting values for springs and winters. Once they have covered old requirements we feel values will fall.
• The first human consumption shipments are due from the UK w/c 29th September adding to French shipments dispatched last week, making supply is plentiful in N Africa.
                   

Malting barley

Crop 2014

DEFRA final acreage figures confirm large spring and winter crops in England further adding to ideas of a large barley surplus.

Export demand for UK malting is limited for the Oct/Dec period, demand remains good for Jan-June.

In line with grain markets that are wide apart, domestic malting values continued to see a slight decline over the last seven days with merchant shorts leading the market. 

Key malting barley producing states in the US and Canada received a drier spell last week, easing the pressure on the already damaged crop.

In the last financial quarter, UK beer sales were up by 9.5%. It looks like the latest cut in beer duty and the football World Cup helped to boost the nation’s beer demand.

Crop 2015

We have seen good demand for crop’15 contracts especially in the harvest and Oct-Dec positions.

Due to the three-crop rule, blackgrass control and unattractive sugar beet prices we expect demand for spring barley contracts to be high.

Demand is expected to be especially high in the pre-Christmas positions where demand could be limited due to the quality of the 2014 crop.

There is good export demand for crop’15 UK malting barley and the last week has seen an increase in domestic interest.

Gleadell still has a variety of winter, distilling and brewing contracts available for crop’15 to suit all risk profiles.

Feed barley

There is limited export demand for UK feed barley.

UK July export data shows total exports reached just over 98,000mt.

All consumers who can avoid using feed barley are cutting it out of their rations, given that it is similarly priced to feed wheat.

The Russian barley harvest is 5mln t higher, compared to this time last year.

                   

In Europe crushers have good coverage for pre-Christmas positions but the trade remains short with farmers continuing to hold seed as they consider current ex-farm levels unattractive.  The European market remains extremely quiet and the MATIF rapeseed contract continues to trade sideways in a narrow range, at present the market lacks any impetus to break higher or lower. 

The UK market is similar to mainland Europe with a stand-off between the farmers and crush demand and short-covering merchants dominant in the market. At present the biggest influence on price is the impending Scottish vote and fluctuations in sterling

                   

SEED

Seed deliveries are now in full flow. Haulage has become extremely tight due to a shortage of curtain-sided lorries though seed continues to be moved as quickly as possible. Due to this high demand, prices have started to rise to cope with these pressures. 

Cougar, which has performed very well in trials this year, remains available for growers. Cougar has one of the best foliar resistance packages available with the highest untreated yields in trials. With many growers delaying drilling into October to try to battle against blackgrass, Belepi is a good varietal choice. Belepi shouldn’t be drilled until the middle of October at the earliest, and its wide sowing window combined with early vigour in the spring could help growers when trying to out compete black-grass.

For winter barley growers KWS Glacier remains available. However, stocks are now tight, but KWS Tower remains available as a quality alternative, being the joint top two-row variety for yield. SY Venture remains available for malting barley growers as well as Talisman, a new variety, which is progressing into its second year of testing for full IBD approval.

Winter bean seed is extremely tight so we would urge growers to cover their requirements quickly. Stocks will sell out.

FERTILISER

Urea
After six consecutive weeks of witnessing the urea market move from strength to strength, there are signs that it could be running out of steam. Prices have traded up to $393/t FOB Egypt this week (approx. £305/t del farm) . It is thought that prices may have peaked, but it remains uncertain whether we will see any major price correction in the short term.  There is still some significant global demand from Europe, India and South America, which may keep this market buoyant over the coming weeks. But is the market sustainable?  With weakening global grain prices something will have to give to force new demand into the market.

Alzon ® 46
A product used widely in Germany and a new approach being adopted in the UK. This stabilised nitrogen fertiliser is a large granule, averaging 3.5mm with a bulk density of 800 kg/m3. A nitrification inhibitor is added during the manufacturing process so is completely incorporated within each individual granule. The use of this environmentally friendly product involves less work and it can be included in any fertiliser programme.  Gleadell can offer Alzon on a November and December-delivered farm basis.  If you are starting to plan your options for next year this is a product well worth considering. With urea and ammonium nitrate prices firming, Alzon is currently a very cost-effective alternative.

AN
After increases across Europe and the UK, ammonium nitrate prices have again only managed to trade sideways this week. Imported values remain static, trading at the usual discount to UK manufactured product. It is interesting to highlight the amount of demand still to surface in the UK to catch up with a ‘typical’ year.  There are many growers that have not bought a tonne and, with a predicted figure of over 1mln t of product still to be delivered to farm and a shortening delivery window, more price increments are expected. The fertiliser industry could potentially see a huge bottleneck in the run up to spring application and so consideration should now be given to taking a percentage of spring fertiliser requirements to spread the risk.  Gleadell can offer very competitive finance deals to suit all circumstances until 2015. For more information please contact your local Gleadell farm trader or the fertiliser department on 01427 421244.

P&K
Phosphates continue to firm both globally and in the UK.  Although much of the autumn demand has now been covered, there are still some large shorts that need covering and this will keep the market firm for the short term. With regard to potash, we have seen a very flat market for most of the year, however things do look to be firming. Blenders in the UK have continued their price increases this week on both spring and autumn grades.


 

                   
MARKET INDICATOR KEY: Upward market pressure Downward market pressure Neutral
£/€ £/$ €/$
1.2677 1.6333 1.2879
  Feed Barley  Feed Wheat
                   Beans Oilseed Rape
£ +/(-) £ +/(-) £ +/(-) £ +/(-)

Nov

14

99.00 -
104.00
Depending
on area
100.00 -
114.00
Depending
on area
175.00
- 240.00 -
245.00
Depending
on area
 
May
15
105.00 -
110.00
Depending
on area
107.00 -
121.00
Depending
on area
180.00
- 246.00 -
251.00
Depending
on area


Speak to your Gleadell contact to see how we can help you in challenging grain markets

 NB: Prices quoted are indicative only at the time of going to press and subject to location and quality.

Gleadell Agriculture cannot accept liability arising from errors or omissions in this publication.

Gleadell trade under AIC contracts which incorporate the arbitration clause.

GRAIN PASSPORTS

Please do not use your old grain passports. Many consumers are rejecting any loads that turn up with the old passports so please contact your Gleadell farm trader if you need some new passports.

HGCA RISK ASSESSMENT TOOL

Please visit the HGCA online portal for calculating your risk assessment score to go onto grain passports for any premium grade wheat that you may be having collected. www.hgca.com/mycotoxins

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.