Market Report wc 6th April

Posted by Anderson Grain Marketing on May 4, 2020 in AGM News | 0 comments

Following yet another extremely volatile week, London LIFFE wheat futures are slightly firmer this morning.  

Although some may from the peak of £175.25/T, the London LIFFE wheat future for November is valued at £167.00/T this morning, the equivalent of £160.00/T ex-farm for harvest collection.  

Feed barley continues to trade at a £30.00/T discount to wheat.  

As for old crop values, £155.00/T ex-farm for spot collection feed is indicated this morning, but buyer demand is extremely thin now that the short-term demand in consumer “panic buying” has subsided. Feed barley is doing comparatively well in the region of £132.00/T ex-farm.  

With little fundamental support against a back-drop of a large global wheat area, market tone has turned bearish.  

Rumours of potential export restrictions from the Black Sea are beginning to circulate – but there is little evidence to support this. For now, they are providing some short-term volatility, but nothing much more than that as the restrictions will have little impact on  intended volumes.  

Apparently, the Russian agricultural Ministry is looking at a 7 million tonne cap on all wheat exports from April to June 2020. However, Russia has already exported 23.9 million tonnes of wheat, around 85% of its intended forecast anyway.  

As for the Ukraine, the trade have agreed to curb wheat exports at 20.2 million tonnes this season in order to “protect national interests” and relieve some of the pressure on wheat prices. However, Ukraine have already shipped 17.2 million tonnes of wheat this season.  

There is an awful lot going on in the background at the moment with regard to the global oil market. Political tensions, bio-ethanol uncertainties and coronavirus are all adding volatility. The following few issues may be worth some consideration, particularly for those of you who have unsold stocks of old crop OSR.  

According to an online report by Bloomberg, both the Coronavirus and cheap oil are hitting the global fuel industry “hard”, so hard that many bio-ethanol producers are ceasing operation and some “may never come back again”.  

Bloomberg add that the “entire biofuel industry is facing a reckoning”. Long before the pandemic emptied roads and exacerbated an oil price war, producers were already battling “chronic oversupply and trade upheaval”. Now, slumping demand and prices mean smaller producers and those with heavy debt loads will struggle to ride out the losses. There are too many plants that will simply run out of capital.  

Seen as a greener alternative to gasoline and once promoted as a way for countries to wean themselves off a reliance on foreign oil, the industry is now facing significant difficulties. Maize corn based ethanol plants are closing throughout the US, Brazilian producers of sugar cane based fuel are sinking further into debt, and efforts to simply use more bio-ethanol are being jeporidzed in Asia.  

While cheap fuel is good news for consumers, its costing both biofuel producers and US farmers – who currently sell about a third (33%) of their corn crops to the ethanol industry.  

In Europe, where more than 70% of rapeseed oil is used to make biodiesel, uncertainty about the future of blending demand is causing problems for suppliers. Alcogroup, based in Brussels, is just one example of an EU plant reducing production by 30%.  

Crude oil futures jumped by a initial 47% on Thursday after Trump said that he expected “Saudi Arabia and Russia to reach a deal soon to end their oil price war”. Russian President Vladimir Putin also called for a solution to the “challenging” oil markets.  

Trump claimed he had talked recently with the leaders of both Russia and Saudi Arabia and believed that the two countries would make a deal to end their price war, lowering production and bringing prices back up. Prices are now above the vital $30/barrel mark.  

Although we are yet to see any support to oilseed markets – there is an Opec+ (Organisation of the Petroleum exporting Countries) meeting happening today in the hope that some formal agreements may be made.  

Over in Argentina, logistical delays owing to coronavirus have also affected the crushing of soybeans. Argentina is currently the world’s leading supplier of soymeal and with the country currently in the middle of an anticipated 15.1 million tonne harvest, the reported delays at crushers and ports could have a knock-on effect on global soybean meal supply.  

Regardless of the above, old crop OSR is valued at £307.00/T ex-farm for spot collection.  

The latest USDA stocks and plantings report was released last week, and there are a few key points worth noting:  

• The total planted area for maize corn in the US in 2020 is estimated at 39.2 million hectares, an 8% increase on last year. This is the largest planted area since 2012 (interested given that up to a third of this crop is now potentially redundant given the bioethanol market).  
• The total planted area for soybeans in 2020 is estimated at 33.8 million hectares – a 10% increase from last year.  
• The total wheat planted area is estimated at 18.1 million hectares, a further reduction from initial estimates and the smallest crop ever recorded.  

Elsewhere, the condition of the French wheat crop has declined slightly again last week with 62% now deemed to be in a “good to excellent” condition. This is a decline of 1% from the previous week and is quite a significant drop from the rating of 84% given this time last year. According to France Agrimer, spring barley sowings were 97% as of the 30^th March following an excellent period of “excellent conditions”. Previously, France were falling behind with their progress due to wet weather.  

The latest ADAS crop development report for the UK was released on Friday, the results of which are summarised below. To view the report in full, please see the ADAS website.  

The report gives us a good indication of how winter crops have performed over the winter, and the progress of spring drilling so far (as of 30^th March).  

WHEAT 

• As expected, drilling of winter wheat is now complete with any further area unlikely to be added. However, with pockets of winter wheat drilled in late February and early March, 6% of the winter wheat crop is not yet emerged.  
• Of the winter wheat crop that has emerged, 67% is rated as “fair to good”, with just 9% rated as “excellent”. 18% of the wheat crop was deemed to be in a “poor to very poor” condition.  
• Comparatively, at the same point last year, 36% of the crop was rated as “excellent”. This highlights the effect of the challenging weather conditions experienced across the UK this autumn and winter.  
• It should be noted that the improved weather in the latter half of March enabled plenty of nitrogen applications to be completed, which may have enabled some poorer crops to recover.  
• Drilling of spring wheat began in the last two weeks of March, with settled weather benefitting soil conditions. The earliest drilled spring wheat was showing good emergence by the end of March.  

BARLEY  

• An estimated 50% of the intended spring barley area was drilled by the end of March although this area is likely to rise, with some failed winter crop area switching to spring barley.  
• Spring barley drilling is 4% ahead of last year’s progress.  
• As for winter barley, the later drilled crop has shown varied levels of establishment due to the wet weather. 18% of the winter barley crop is rated as “poor to very poor” whilst 10% is deemed to be “excellent”.  
• For comparison, last year, 0% of the winter barley was rated as “poor to very poor” whilst 22% was deemed to be “excellent”.  

OSR 

• Winter OSR drilled early with adequate moisture has established well. However, later sown fields were reportedly showing signs of crop stress as they were more vulnerable to pest damage.  
• Now, approximately 15% of the crop was deemed to be in a “very poor” condition with questionable viability for the remainder of the season. A further 22% of the crop was rated as “poor”. This combined rating of 37% is a significant increase on the combined 17% rating published in the previous report on the 19^th March.  
• As the majority of the crop (56%) enters the “green bud stage”, it is increasingly evident in fields which plants have been stunted from pest and waterlogging damage. Disease pressure over winter was relatively low.  

OATS 

• Drilling of winter oats is reportedly completed, with only small areas drilled in February and March. 53% of the crop is deemed to be in a “good to excellent” conditions”, with only 14% considered to be “poor to very poor”.  
• It is estimated that 45% of the intended spring oat area was drilled by the end of March.