Category: Arable

Discussions with Member States are set to recommence on the possible renewal of Glyphosate, although the proposal looks likely to be for 10 years rather than 15.  Whilst Farm Commissioner, Phil Hogan and Commissioners for Climate Action and Trade are all pushing for a 15 year approval, Commissioners for Internal Market and the Environment would like to see the renewal for less than 10 years.  A new proposal for reauthorisation is being drawn up and ‘technical’ discussions will be re-launched with Member States shortly.  A decision on the re-approval will be made by the end of 2017 at the latest.

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 green light for the proposed takeover by Chemchina of Syngenta.  As expected the approval is dependent on some significant divestitures.  The state-owned chemical company based in Beijing, will divest a large amount of Adama, its pesticides subsidiary business based in Israel.  The bid has also got the go-ahead from the anti-trust authorities in the US which should now pave the way for the takeover to be completed by the end of 2017.  This is the second Ag Chem merger to get given approval in the last month (see Dow & DuPont ) raising concerns within the industry of less competition and therefore higher prices.  In addition formal notification from Bayer of its proposed acquisition of Monsanto is expected shortly, with the aim of obtaining EU approval by the end of the year.  However, approval may be hampered by complications arising from the renewal of Glyphosate and the extension to the neonicotinoids ban.

EU Farm Commissioner, Phil Hogan, has said he would like to re-authorise the use of Glyphosate for ‘at least 10 years’ to give the industry some certainty.  This gives a guide to where the EU Commission stands on the key pesticide, but, as we have previously written, this does not guarantee re-approval.  Last month re-authorisation appeared to take a significant step forward when the EU’s Chemical Agency (ECHA) concluded that Glyphosate is non-carcinogenic.  However, even this finding is now being challenged by some MEPs, saying that the findings were influenced by the chemical’s manufacturer, Monsanto.

The iconic UK cereals firm, Weetabix, has been bought by the US company Post Holdings in a deal worth £1.4bn.  China’s Bright Food took a majority share in the Weetabix business, which is made near Kettering, Northamptonshire, back in 2012.  The hope was that the cereal would become popular in China, but this never really happened.  The Weetabix portfolio includes Alpen, Ready Brek, Barbara’s and Weetos.  All of the wheat used in the breakfast cereal is currently grown within 50 miles of the Kettering base.  When the business was put up for sale in January, Associated British Foods was rumoured to have been interested, but the weak Pound is likely to have reduced its buying power in contrast to the Dollar’s recent strength.

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.

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.