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Market Update May 2018

Spring drilling has finally been completed, with all but the heaviest ground now in crop. It remains to be seen how these late-drilled spring cereal crops fare (especially those planted into less than ideal seed beds); if the weather is sympathetic, they should be pretty reasonable – but that is a fairly significant ‘If’!

The increasingly tight supply of old crop wheat is beginning to be reflected in values, with June’18 wheat worth anywhere between £162-£164/t. Over the last month wheat for immediate movement was almost trading at a premium for (??) movement in June – reflecting the high demand for feed wheat in the north. Going forward, it is hard to see old crop values weakening greatly; with very few significant tonnages left on farm, it also begs the question as to where wheat values would be had we not already imported so much from abroad. It is also worth noting that full-spec milling premiums have also extended to around £12-£15/t, depending on feed-base, a consequence of diminishing UK supplies.

New crop is also continuing to rally, with November’18 values peaking at £157-£158/t depending on area and with as-available £5/t less. Developing dry-weather worries, tighter world stocks and increasing oil values are all lending credence to the increase in new crop grain markets. As yet there are no seriously detrimental weather issues around the world, and they would not become apparent for at least a month, but it does make you wonder how an already buoyant new crop market would react if there were a serious weather issue in one of the main grain-producing countries.

Feed barley has finally lost ground to wheat, with spot feed barley trading around £150/t for June. With a high degree of livestock now out at grass, barley demand has dropped, but with spot wheat now at a £12-£14/t premium it will be interesting to see if barley picks up a little more demand in the run-up to harvest. New crop values for barley are around £10-£12/t discount to feed wheat; and apart from harvest movement, it is unlikely that many people will be tempted to sell. Given barley’s performance over the last marketing year, rightly or wrongly, many growers will be looking to sell at values much closer to wheat.

Oilseed rape (OSR) has seen a late surge in old crop values, with June’18 trading at £296-£298/t and November’18 £303/t at the time of writing. A general sharpening in commodity values, especially oil, combined with last-minute domestic demand has helped firm values. Even given the rise in values, I cannot foresee many sellers of new crop and it will remain to be seen whether the fabled £300/t which a lot of growers have been hanging out for is achieved (at this point you wouldn’t bet against it!).

The trade is still anticipating new season Ammonium Nitrate (AN) values, with new season urea values brought out earlier this month but only on a limited tonnage. Initial values were £210/t for 46% granular Urea (July-September delivery), which on a cost-per-unit-of-Nitrogen would have to make 34.5% AN less than £160/t to be directly comparable. It is unlikely that new season AN prices would be anywhere near this level, but the general consensus within the trade is that anything below £195/t would represent good value, especially with current new crop wheat values.

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