Category: Arable

Great Plains has announced it will be closing its base in Sleaford, Lincolnshire.  Production at the plant will discontinue this year, with its facility fully closing down in early 2018.  The company has blamed the worldwide downturn in agriculture on its decision to close its UK factory.  Great Plains acquired the site from Simba in 2010.

Old Crop

Farmers’ grain stores are nearly empty. Consumers are happy to wait if possible to purchase for new crop being a fresher sample at a lower price although quality is still unknown. The crops of smaller overall tonnage such as oats and pulses are all-but completed and the focus of attention is strongly now on the crop emerging in the field.

New Crop

Irrigators have been spotted on combinable cereals in East Anglia in the last couple of weeks. Rain fell yesterday whilst at a meeting in Ely, and the attendees, were celebrating its arrival as a lovely day. For germination and establishment of later drilled spring crops, some areas have been short of water. However for many areas, the occasional showers have just about kept the crops growing. Maybe this will lead to a greater variation of yield than we usually see.

The global price is unaffected by UK crop conditions of course, but at this time of year, the conditions in the likes of the US do have an impact on prices. And weather conditions are not necessarily ideal for everybody: Rain is required by those with crops emerging from winter dormancy and spring crops planted and dry conditions preferable for those yet to get onto their land. There are some parts of the US that are suffering from drought conditions, but we also note some parts of the US continent are drought-prone. On a global scale we would be smart to remind ourselves that stocks of wheat and coarse grains are at a high point and so while a crop failure would add to the global price matrix, it would have to be massive to push prices substantially. Politically, the leak that President Trump was planning his exit papers from NAFTA knocked the markets, but the subsequent denial of this calmed the traders.

The EU hasalso had some unusual weather that has been impacting on growing crops. Dry conditions in the UK, parts of France and Spain, have been causing crop development challenges. It is too early to tell whether crop yields have been seriously impacted in any areas.

In the UK, malting barley premiums are remaining firm (higher than for the past 5-years average) for both old and new crop. With a potentially large spring barley crop this year, we could be seeing this decline at or after harvest.

Oilseed prices have slipped again this month, as new crop values ended the month about £10 per tonne lower than they started. This is largely on the basis that considerably more soybean is being planted this spring probably as farmers are noting coarse grains and wheat prices are still near their 10-year lows that were recorded in February. It is still £30 per tonne more valuable than this time last year though.

The EU Commission has given the go-ahead for the merger between Dow and DuPont, setting a precedent for the other takeovers in the agro-chemical sector (see February’s article).  As expected the approval is dependent on the companies divesting some of their businesses to allay competition fears.  The plan is for the new company, DowDuPont, to have three separate divisions focusing on agriculture, materials and speciality products.  The deal still needs the approval of regulators in the US, Brazil, China, Australia and Canada.  However, the companies are confident of obtaining this.  The EU’s decision on the takeover of Syngenta by ChemChina is expected shortly, whilst Bayer is hoping to obtain approval for its acquisition of Monsanto by the end of this year.

Normally at this time of year the markets become rather tetchy; old crop is mostly sold now, at least priced and committed even if still in the barn, and new crop fundamentals take on greater priority in price setting.  Northern hemisphere winter wheat crops emerge from dormancy and their conditions play games with the market, plusspring grain crops are planted.  Globally, spring cereals are greater in area and total tonnage harvested than winter grains, because maize is a spring crop and much wheat, for example in Canada, is spring planted too.  Their planted area and establishment conditions are therefore also critical in influencing markets.

Badly needed rains in the US wheat belt are forecast to arrive this week, which has pulled US (and therefore EU) wheat prices down.  However, bearing in mind the winter crop covers a smaller area than formany years, we believe there might still be upside opportunity if the maize plantings are also down on last year.  We will find out in the coming weeks.  However, the EU is likely (according to Coceral) to harvest more wheat than last year (largely based on the French crop failure last year not being repeated).

In the UK, spring drillings have been excellent for the first out of the blocks, including in Scotland.  However rains in the second half of March have hampered some drillings.  Nevertheless, the overall drilled area is set to be high this season, with spring barley area being possibly the third largest since the late 1980’s.

The oilseed market is potentially looking overpriced, with a large Brazilian soybean crop, long-holders feeling vulnerable and stocks continuing to rise.  The last season has seen OSR prices trading at comparatively good values compared with the rest of the combinable crop price matrix.  Maybe this is coming to an end.  There is little market interest in old crop pulses now, if anything attention is starting to turn to new crop although it is early days yet.

Draft regulations have been circulating in the EU Commission which, if approved, will see the introduction of a complete ban on the use of neonicotinoid seed treatments that pose an ‘acute risk to bees’.  The decision comes after an updated risk assessment carried out by the European Food Safety watchdog (EFSA).  There is already a partial ban in place on clothianidin, imidacloprid and thiamethoxam on some crops (mainly flowering plants including oilseed rape).  According to the drafts, Member States should be given time to amend or withdraw authorisations for plant protection products which include these chemicals.  Oilseed rape producers have struggled to control pests since the introduction of the ban.  A publication produced by HFFA Research has found that the EU restrictions have cost the oilseed rape industry €900 million a year, due to increased spray costs and damage from pests such as the cabbage stem flea beetle.  Member States are due to vote on the Draft Regulations in May.

The widely-used herbicide, glyphosate is not carcinogenic.  This finding comes from the EU’s Chemical Agency (ECHA) which has given its highly anticipated opinion, saying the available scientific evidence ‘did not meet the criteria to classify glyphosate as a carcinogen, as a mutagen or as a toxic for reproduction’.  This opinion will form part of the assessment of whether the active substance will be re-approved for a new 15-year period.  The Risk Assessment Committee has concluded that, when used correctly, glyphosate does not pose any risk to human health, although, it will retain the current harmonised classification for glyphosate – a substance which can cause ‘serious eye damage’ and is ‘toxic to aquatic life with long-lasting effects’.  The ECHA is responsible for managing the harmonised classification and the labelling process for hazardous chemicals.  Its opinion will be taken into account by theEU Commission who make the final decisions on the classification.  The EU’s executive will also take the opinion into account when it decides whether or not to renew its licence.  A new proposal for re-authorisation is now expected to be drawn up and discussions recommenced with Member States.  A decision on the re-approval will be made by the end of 2017 at the latest.  Whilst this positive opinion on the active ingredient used in Roundup and will be a relief to many in the industry, it does not, in itself, guarantee re-approval.  There is always a chance, albeit now smaller, that politics will override science.

The highly-anticipated opinion from the EU’s Chemicals Agency (ECHA) on the safety of glyphosate is expected to be made on 15^th March.  This is ahead of the expected schedule; it was anticpated in the summer.  The scientific opinion is expected to be announced at the Risk Assessment Committee.  The agency’s opinion comes after the EU Commission extended the licence, for the most widely used herbicide, by 18 months after Member States failed to reach a qualified majority position on its re-approval.  The opinion will be use in the Commission’s ‘classification’ of the substance.  The EU’s executive will then take the agreed classification into account when deciding whether to renew the approval of the active substance.

The price of feed wheat is more or less the same as it was at the start of February for both old and new crops. The market is relatively quiet and low volumes have traded. Globally, values have sunk a bit, leaving domestic prices at a premium to European equivalents. Indeed, whilst exports have been slow, we are in some areas at a price where importing from the Continent is cheaper. This will cap the upside of UK values so suggests this is a selling opportunity.

Globally, the International Grains Council, which published its most recent update on global supply and demand only last week, has projected a 2% lower global wheat crop this coming harvest, based on smaller plantings. The US for example, the world’s leading wheat exporter has a considerably lower wheat area. Two percent might not sound much, but the 2016 harvest topped 750 million tonnes, so represents 15 million tonnes, which is slightly more than the UK usually harvests.

Domestic feed barley prices are also mostly higher than the export values meaning any further upside is surely limited to rises in EU values or currency movements. Meanwhile, malting barley exports continue. Most people will have noticed that the expectation for considerably higher spring barley plantings this year is considerable, heading towards the area of the enormous 2013 crop which was the highest planted spring barley area since the late 1980’s. Our belief is that whilst we don’t expect anything quite so high, a rise in the region of  8 to 10 percent is likely. Taking the reduction of winter barley area into account and adjusting for average yields, this could mean a 2-3% increase in overall crop. This is relatively small in terms of the total barley market, but could be more considerable for the malting premium market: Maltsters are sitting quietly happy.

The decline in wheat area in the US and other areas as observed by the IGC (explained above) also means more land becomes available for other crops. So it is that US soybean plantings are foreseen this year. This could of course have a bearing on OSR values. Soybean accounts for the majority of global vegetable oils so is dominant in the pricing of the entire price matrix within which OSR fits. Indeed, OSR prices have fallen a few euros in Europe this month.

The pulse market tends to slow down considerably when the Australian pulse harvest gets underway as it has done this year. Those with old crop beans left in store, should now be looking for opportunities to sell them as these will become more infrequent. The bean market has, as a result slipped back over the last month as buying interest from importers such as Egypt has shifted to the Antipodean marketplace.

A recent report has revealed that an estimated 8.3% of the winter OSR in Great Britain has failed this autumn.  The report by the Kleffmann Group reveals that the losses were mainly due to flea beetle damage and slugs.  The loss of neonicotinoids continues to be a real problem for growers.  This is particularly true in the East and South East of England where losses of 18% and 16% respectively have been reported.  In theseareas, dry conditions at drilling meant plants were slow to establish.  Some of these areas may be re-drilled in the spring, but this comes on the back of four years of declining OSR area and an anticipated 5^th year, if our early Bird Survey forecasts are borne out (-4%).  Despite good prices, in some areas the economics of growing OSR are becoming very questionable simply because yields cannot be achieved.

The wave of mega-mergers in the global agchem and seeds sector are seemingly making some progress with EU competition authorities.  Dow and DuPont have agreed to divest some business units (including parts of DuPont’s crop protection business) to ally competition fears.  Similarly, Sygenta and ChemChina have committed to some small divestments where their activities overlap.  The EU is set to rule on both mergers towards the beginning of April.  However, competition authorities in many other parts of the world (not least the US) also need to have their say.  The parties to both deals would like them concluded before the middle of the year.  The other takeover in the sector is that of Monsanto by Bayer.  Whilst this is a little further behind in terms of regulatory process, the aim would still be for it to be complete by the end of 2017.