Vulcan logic

So, the Genie is well and truly out and is currently having a party.  Wishes have been granted this week for November Liffe feed wheat at £208, Group 1 milling wheat at £250 per tonne ex farm, feed barley at £192 per tonne ex farm spot, jobs for mahouts are available spring 2022 and Captain Kirk really has gone into space!

The WASDE published on Tuesday afternoon, predicted a further tightening of global grain stocks.  Pre the report, Trade expectations were for decreased global wheat stocks and increased global corn stocks.  According to the report both these occurred, but the decrease in wheat was greater than the increase in maize.  Net result Tuesday evening UK wheat up £4/tonne on the Liffe.

The UK oilseed market has had a turbulent week also. Monday and Tuesday saw the tactical withdrawal from the market of the ‘Crush’ buyer for Hull delivery and we watched the Paris Matif Rapeseed market fall approximately 28 euro over the two days.  Wednesday morning saw the Matif recover 10 euro/tonne and the buyer returned with substantially lower bids for rapeseed delivered Hull.

Volatility in the grain markets is here to stay for some while.  No longer does the market move with a rhythm of £1 per month.  Daily swings of several pounds in either direction are the norm. Information and news are instant. Influences from around the world of crop yields, grain stocks, weather, currency exchange rates and ‘City money’ are now part of our daily trade.  Most recently, it would appear also that the price of Co2 gas and therefore the price of our Ammonium Nitrate is too.

So, if Captain Kirk really is in space, here is a little of Spock’s Vulcan grain trading logic!

For the crop just harvest early season early season ammonium nitrate was purchased at around £200/ tonne.  Using 240kg/ha of ammonium nitrate and growing 10 tonnes per hectare of wheat, the ammonium nitrate cost was £14 per tonne of wheat produced.  Harvest ‘21 wheat was traded forward ex the farm in large volumes between £150 and £160 per tonne until the end of April when drought, frost and other factors started to push prices higher.

Early season ammonium nitrate traded in June this year at approx. £300/tonne.  Which is equivalent on the same terms as above to £21 per tonne of wheat.  Wheat was trading at £170 ex farm for harvest 2022.  Ammonium nitrate cost up £7/tonne of wheat produced.  Wheat sales if made up between £10 and £20 /tonne.

Currently the chit chat in space would have ammonium nitrate approaching £700/tonne and not drilling wheat is the hot topic.  £700/ tonne equates to £49/tonne of wheat produced on the same 10 tonne per hectare crop using 240kg/ha of ammonium nitrate.  This is £35 per tonne of wheat more than the previous year.  BUT wheat is £185/ tonne ex farm for harvest 2022 or £190/tonne November 2022.  £35/£40 per tonne more than the early season trades undertaken for this current harvest. Essentially then, all other things being equal, the same!  More money turning over – same net result.

It is possible to grow cereals and take a Phosphate and Potash ‘holiday’, but you cannot grow 10t/ha of wheat without ammonium nitrate.  Perhaps then, regardless of when you are pricing your ammonium nitrate for this growing crop you should put the Genie back in the workshop and lock into some harvest 2022 wheat trade at current levels. It is the logical thing to do.

‘Live long and prosper’

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