ADM Agriculture Viewpoint Spring 2020

Page 1

ADM Agriculture Ltd


Viewpoint Inside this edition of Viewpoint Market outlook Pages 2 and 3

ADM Agriculture Ltd Keeping the wheels turning The seismic events of the past few months have been testing for everyone, in all parts of the economy. On top of the awful autumn and winter weather, plus the ongoing uncertainties of Brexit, we are now living with the unprecedented effects of Covid-19. However, it has become increasingly clear that the food and feed supply chain is able to function efficiently and in a critical mass that is large enough to ensure that people and animals are adequately fed. This has meant that our sector has risen up the ‘important industries league’ and is now a clear priority for all governments and this is the case in the UK as much as anywhere. ADM Agriculture is equipped to play its role in this effort and is committed to doing so. Through our farm trading, logistics, processing, accounts, IT and trading teams, we have moved rapidly to ensure deliveries are scheduled and arrived, payments are made in a timely fashion and that our trading activities

enable market functions to continue in volatile trading conditions. In addition, our port operations continue to provide access to our customers’ feedstuff needs on a national basis. At the same time, our fertiliser team continues to supply farmers to order and our Long Sutton plant is extremely busy meeting spring seed demand, whilst also processing human consumption pulses for the huge demand that has been evident in the canned pea market. For all participants in the supply chain it is essential to be able to rely on our trading partners, and this is more than ever the case in the events we are living through. ADM provides our customers with the necessary scale, size and financial credibility to enable us all to come through the coronavirus crisis and to flourish in the future. We remain ready, willing and, perhaps most importantly, able to work with our farmer and end consumer customers through this difficult time.

David Sheppard, director

ADM Agriculture’s marketing team assesses the key factors that are driving the main commodity markets and examines prospects for the months ahead.

ADM. Unlocking Nature. Enriching Life. Pages 4 and 5 The close relationship between ADM Agriculture and its 6000 farmer customers is helping to create resilience in these turbulent times, says ADM country manager Fabian Somerville-Cotton.

Seed, fertiliser & feed reports Pages 6 and 7 Novel plant biostimulants and new genetic traits; how the spring fertiliser market has been shaping up; turbulence in the feed sector looks set to continue.

ADM 365 Page 8 ADM Agriculture’s innovative web-based platform enables farmers to track and manage crop sales and seed and fertiliser purchases more effectively.


Market Outlook Spring 2020

Oilseeds As we enter the final throws of the season, coronavirus has escalated into a global pandemic, eclipsing the earlier impact of the US/ China trade deal and swine flu on the oilseeds markets. Agricultural commodities suffered sharp losses on fears of what might happen to demand and economies, while energy prices fell significantly due to a lack of demand as well as OPEC/Russia oil production politics. Brent and West Texas crude oil values are down over 50% since the start of the year. Veg oil demand followed the downtrend as food consumers, fast-food retailers and biofuel demand disappeared overnight.

At first glance this might help ease next season’s deficit – the current cold weather spreading across Europe is highlighting concerns that the EU crop estimate of 17mln t may be further reduced. However, the EU is still likely to have a large import requirement. In the UK, the sharp fall in EU prices has been slightly offset by the general weakness of sterling. Looking ahead, the many unknowns across commodity prices and/or currency exchanges will continue to influence rapeseed prices. Will Ringrose, head of oilseeds




The supply of oats was 30% above the five-year average at the start of the 2019/20 season. The UK exported 90,000t between July – January, during which time milling oats values remained largely unchanged.

After a slow start for feed wheat and feed barley, the market has shown little improvement as the year has progressed. Large amounts are still left on farm as mills prefer imported quality over home grown.

After several years of decline, the pulse area is likely to increase slightly for harvest 2020, although not to the extent that was perhaps thought six months ago.

Farm supply has slowed considerably since then. The poor winter drilling period and the Covid-19 outbreak supported grain values, leading many growers to over-year their stock or, if poorer quality, feed on farm. As a consequence ex-farm values for April/May/ June have traded at a +£15 premium to the earlier market.

It’s a different story for milling oats and milling wheat (with high protein) which have been in good demand all year. Oats have just started to see a downturn in prices as the last few parcels get cleared up.

Lower winter bean plantings are likely to be more than offset by higher spring bean plantings. But, with many spring crops going into dry seedbeds later than is considered ideal, we are unlikely to see the high yields of harvest 2019. We are therefore likely to end up with similar production year on year, a picture mirrored in much of Europe.

Feed beans have also seen some better prices as the year has moved on and most should find a home prior to harvest.

Looking further afield, Australia has received widespread rain across much of the growing region, prompting some aggressive early selling.

Due to the weakness of sterling against both the euro and the dollar, imports have been expensive, which has helped keep UK prices looking healthy.

There is a long way to go between now and harvest, and rainfall conditions in the UK and further afield will likely dictate market direction from here.

Tony Kenny, trader – organics

Lewis Cottey, trader – pulses and IP maize

For harvest 2020/21 the UK will be reliant on spring-drilled crops to provide milling quality. However recent years have shown that these have consistently underperformed compared with winter-sown crops on quality and yield. Jeremy Pope, trader – oats and milling wheat


MATIF futures lost close to €90 from contract highs due to lack of demand, suggesting a more normal carryout on the old crop balance sheet.

Malting barley has also suffered, as sales dried up and leftover tonnages added to the surplus of feed barley.

Covid-19 has had a huge impact on all our lives and we need to consider what the longer-term outcomes may be when we eventually return to unrestricted movement. Historically, in times of financial crisis, agricultural commodity prices have been dragged lower by negative sentiment before returning to focus on market fundamentals. However, we have not previously seen this level of disruption to the food service sector, or this prolonged period of travel restriction. Clearly people will still eat, but how and where? Will we become more focused on provenance? Will this period of forced isolation reinvigorate home cooking? Will people continue to travel as far and as often, and what will this mean for long term demand? Jonathan Lane, head of grain trading

Milling Wheat

Feed Wheat The global spread of coronavirus has caused major unknowns in all markets over the past few months. The threat to global economies has seen unprecedented action by central banks in an attempt to mitigate the impact of the epidemic, triggering currency volatility. Consumers loaded up on pasta, meat and wheatbased products, prompting a sharp increase in commodity demand across the globe. And, as supply chains became disrupted, some countries adopted export restrictions to protect domestic supplies. Trying to see past the current crisis is difficult, as no-one is sure how long this will continue for, or on what scale. This creates uncertainty in the markets as overall demand remains unclear. Difficulties in moving products within countries

and across borders, coupled with strategic buying, could exacerbate the impact of the pandemic on global food and commodity markets. However, stocks of feed grains remain burdensome and, with 2020 expected to produce a record global crop, further stock expansion is projected. This should provide resistance for higher global prices. In the UK, weather conditions have resulted in a sharp drop in the winter wheat area, some of which will be recouped by spring crops. Supplies of barley are expected to remain plentiful, but the smallest wheat crop for several years will place the UK in deficit for the 2020/21 marketing season. This will place a greater reliance on imports, with the market focusing on price movements at all grain exchanges as well as currency exchange rates. David Woodland, trader – statistics and economics

Growers face a multitude of uncertainties during the final quarter of the 2019/20 marketing campaign, not least the longevity of lockdown restrictions caused by Covid-19 and the UK trade deal with Europe. At the time of writing the true impact on the milling and biscuit wheat balance sheet remains unclear. However, eating habits have changed significantly, with a rise in milling wheat demand to make bread, but a large reduction from the retail and hospitality sector. This has resulted in a stable demand for Group 1 and 2 full specification wheat, but whether this continues only time will tell. Premiums for 13/76/250 spec wheat remain healthy with £20-£27 available subject to location. In contrast, the lockdown has significantly affected biscuit wheat demand, with merchants struggling to find markets to pay premiums of £2-5 for Group 4 and 3 soft/ hard wheats. But, with the 2020/21 harvest area estimated to be down around 35%, the UK will be reliant on imports. Farmers who can store soft wheat into Q3 of 2020 may benefit from better premiums. Milling wheat premium direction will depend on the availability of Group 1 alternatives like German A13.

Malting Barley Alcohol sales have been hit hard, with pubs, cafes and the hospitality sector shut due to Covid-19. Major drinks companies are looking at a big reduction in demand and in some countries production facilities are not even allowed to operate. Brewers and distillers are cancelling malt deliveries, whilst smaller regional and craft brewers face even bigger problems. Maltsters believe we could see a 30-50% reduction in barley demand for the rest of the year and are shutting or reducing malt production. Thousands of tonnes of malting barley have been sold for feed.

For crop 2020, most domestic and export maltsters will require less harvest malting barley than normal, as their stores will be full of malt. October to December demand is also likely to be reduced, but this is dependent on the date that the pubs reopen.

However the crop is not harvested so it is all still to play for. James Forster, trader – northern milling wheat

All of this comes alongside the possibility of another very big EU and UK malting surplus, and with Brexit still hanging over us. On a positive note, as a company we have good forward sales on the books, both domestically and for export. We are therefore well placed to support our growers in these difficult times. It may however be sensible for some growers for go for yield rather than aim for malting quality. Stuart Shand, head of malting barley and projects


ADM. Unlocking Nature. Enriching Life. Just a few short weeks ago I had the privilege to meet with many of you, our valued farming customers, colleagues and partners.

What would it all mean? A bumper crop in 2019 raised morale considerably and as the decade drew to a close a degree of genuine optimism had re-emerged. The country even made up its mind finally to give Boris Johnson and the Conservatives a thumping majority to “get Brexit done”, albeit nobody, including Boris I suspect, knows exactly what that will look like.

Breakfast meeting, Greetham Valley The Farmers Breakfast programme was the brainchild of the team at ADM Agriculture, with 10 meetings arranged across the country, of which only seven were able to be held due to the coronavirus restrictions. These breakfasts are an excellent opportunity for all of us at ADM Agriculture and in fact the wider ADM; be it Milling, Oilseeds, Protexin, Wild Flavours, or indeed the Investor Services team to meet with you, the providers of the vital raw materials of nutrition. These essential ingredients are the life blood of a symbiotic relationship benefiting everyone from producers, processors, distributors and consumers. ADM Agriculture is proud to be able to say that more than 6000 farmers across the UK are now working with us, and that number is ever increasing in these turbulent times. You may recall the backdrop to these gatherings.


as a partner to you our readers, colleagues, customers and friends. As ADM’s UK Country Manager, I am always impressed by the enduring resilience of our clients in every sector of the UK business and none more so than our agricultural partners and customers. Their fortitude in the field transfers well to our meetings at shows, industry gatherings and most recently at the Farmers Breakfasts. Numerous intelligent and considered questions were and are proffered.

Then, as I mentioned earlier, came the rain, and it rained and it rained and it rained. The rain passed as it invariably does to be replaced by something far more sinister.

The question of the dependability of ADM as a counterparty was raised on several occasions and understandably so in these unpredictable times. The anxiety that all of us feel about our business counterparties is founded not in the experience gleaned in “good times” but in times of extreme stress.

Week after week of biblical rainfall with no let up. Virtually the entirety of available UK arable land if not submerged was most definitely waterlogged and unworkable. David Sheppard, Director at ADM Agriculture, indeed commented in our last edition of Viewpoint that in a 35-year grain trading career one gets to see a fair bit, but neither he nor any of us had ever seen anything like this. As it subsequently transpired this deluge from above was just the start of this most extraordinary passage in history.

In 2008 the financial world as we knew it collapsed. Twelve years on and the UK has endured austerity, unemployment, a housing price collapse, a myriad of other challenges. Banks and their employees had become the pariahs of the early 21st century. In 2016 just as life was improving the UK decided to ditch the EU and Brexit was spawned; huge uncertainty followed and particularly for our farmers. A more divisive period in our recent history is hard to recall with families and friends divided the length and breadth of the UK.

In the following paragraphs I shall reflect on history, and history in the making, and will affirm the prudence of your choice of ADM

For farmers, the outlook is one of no more subsidies but an amorphous mantra of public money for “public goods”.

The emergence from Wuhan, the Capital of Central China in Hubei province, of the coronavirus, or Covid-19 as the virus has become known. Covid-19 is a global killer, a pandemic the like of which has not been seen since the Spanish Flu of 1918. We find ourselves and the global economy shutdown. We are living at this very moment with the most extraordinary restrictions imposed on every one of our lives. The removal of free movement, civil liberties arrested and future aspirations mostly in tatters.

Fabian Somerville-Cotton, managing director ADM Investor Services International Ltd ADM country manager

Where does this leave us all?


First and foremost, ensuring the health and welfare of our families, colleagues, friends and members of our community.

ADM Investor Services International Limited (ADMISI) is a full service multiasset brokerage company with an 106-years corporate history in London and extensive experience in the international investment markets, offering clearing

The marvellous miraculous NHS are at the

and brokerage services into all major

frontline risking everything to administer

investment markets.

life-saving care to all, from the poorest to the Prime Minister himself. True British grit, a cause for optimism as always. Amid this chaos, we in the farming and agriculture community play a vital role in supplying and providing food and nutrition

ADM Milling, Avonmouth The port operations are brimming with animal

in all its forms. ADM globally and in the UK

feedstuffs to supply your animals that must be

is playing its part, processing and delivering

fed, whatever is going on around them. Even

nutrition to a world that always needs food.

our financial services group is working tirelessly

ADM in the UK is of unparalleled strength in

to support our farmers and other clients as markets gyrate wildly.

ADMISI facilitates over 180 million

flour mills, 19 port operations and over five

ADM Agriculture and the ADM companies

banks, institutional investors, corporates

million tons of crops, traded or processed,

operate in the most certain of industries

and trade clients, and high net worth

ADM is central to the UK agricultural economy.

whatever the economic or social climate. As

As we work to support the current challenge,

our customers, colleagues and friends, you can

ADMISI is a wholly owned subsidiary of

our flour mills are producing at levels rarely

be assured that ADM Agriculture is a strong

Archer Daniels Midland (UK) Limited in

seen, whilst our crush is equally striving to

partner for you at a time like this and indeed in

meet this unprecedented requirement.

times of normality too.

this sector. With 10 processing plants, seven

derivatives contracts a year on behalf of


the UK and indirectly is a wholly owned subsidiary of the Archer Daniels Midland Company. Tel: +44 20 7716 8000 Email: View the Q1 edition of The Ghost in the Machine here

ADM Erith


Seed Report

Plant breeder’s glasshouse Photo courtesy of RAGT Seeds Since our last Viewpoint in the autumn we seem to have had every extreme of ground conditions. Much of the UK was extremely wet, with water delaying vital first N applications to struggling crops.

James Barlow head of seed

The ground then dried so fast that many drills found it difficult to penetrate. A truly remarkable turnaround in such a short space of time. Many winter cereal crops will need careful management as they will be poorly rooted and have insufficient tiller numbers to reach their yield potential. Biostimulants can play a vital role in helping plants overcome stress and should be utilised to their full extent.

Genetics, genetics, genetics‌.

With chlorothalonil gone, more impetus

Over the past 12 months we have seen a raft

inherently good resistance to Septoria tritici.

of new genetic traits come to the market. RGT

Recommended List newcomer RGT Saki has

Wolverine is the first commercially available

a rating of 6.8 against S tritici, as well as 9 for

variety of winter wheat with BYDV resistance

yellow rust and 8 for brown rust, making it a

in Europe, essential after the loss of Deter and

very competent feed wheat with high yield

reduced efficacy of foliar aphid control.



The number of OSR varieties with Turnip

Early-drilled wheat

Yellows Virus resistance is increasing as this

The increased area of fallow land this season

trait has begun to dominate yield trial results.

will provide the perfect entry into an early-

Plant breeders are continually enhancing and developing genetics to the benefit of grower and end user. ADM is committed to the marketing of improved genetics.

ADM is currently developing a wide range of biostimulant products, looking at benefits like nitrogen-fixing endophytes and enhanced rhizobia for pulse crops, as well as developing existing micronutrient products, to name a few. Thinking forward to the autumn, ADM will have Exseed for winter beans, which increases the rhizobia level beyond that found naturally in the soil, thus increasing nitrogen fixation capabilities. We also have Boost, our enhanced phosphite product for cereals and OSR to help with early rooting and help overcome plant stress.

will be placed on choosing varieties with

Crossing wheat Septoria resistance

Photo courtesy of RAGT Seeds

drilled first wheat this autumn. KWS Parkin is a new Group 4 that looks very suitable. It benefits from being extremely short and stiff strawed, key characteristics for an early-drilled wheat and on bodied land where lodging is a concern.

Feed & Fertiliser Reports The signing of the US-China phase one agreement on 15 January seemed to signal the beginning of a return to relative stability after 18 months of fractious trade negotiations between the world’s two largest economies.

feedstuff demand, it has been felt more widely across the industry. Lack of container availability, particularly for chilled and frozen goods heading to China, has wiped out meat processing margins, compounded by the shutdown of restaurants and takeaways. Nick Halle trading manager, feed

Set against a backdrop of falling global demand for feedstuffs as China struggled to contain the spread of African Swine Fever, this deal represented a ‘bonanza’ for American agriculture.

The reduction in petrol consumption has been estimated at between 30-50%, which has been disastrous for the ethanol industry and subsequent DDGS production.

China had agreed to purchase an average of $40 billion of US agricultural products over the coming year in exchange for cuts to tariffs on Chinese goods. However, it was the outbreak of another contagious disease that soon caused this to pale in significance.

An estimated cut to ethanol production of 20% would release approximately 28mln t of US maize demand back into the market, which is already trading at a significant discount to feed wheat in the UK. Low oil prices, exacerbated by the OPEC/Russia dispute in March, have been equally damaging to the biodiesel industry, with oilseed processors winding down crush rates.

Since the Covid-19 pandemic was declared, the Chinese government has given assurances that it will meet its obligations under the agreement. However, the ensuing economic shut-down has not only stymied the recovery of Chinese

Meanwhile South American crops have quietly continued to develop, with Brazil reporting a record 120mln t soybean harvest, although bad weather in Argentina has seen estimates revised down to sub-50mln t from expectations of

The coronavirus pandemic caused only minor disruption to the UK fertiliser trade during March and April. It was perhaps slower moving due to some administrative employees working from home, but in the main our sector has remained very much functional.

to delay no longer to avoid disappointment. Spring pricing is set, so there is simply no cost benefit to be had.

Spring market

Calum Findlay head of fertiliser

We believe that movements within mainland Europe have been a bit more problematic. Some countries became more cautious, making land border crossings difficult. Fortunately, fertiliser has been recognised as an essential part of the food production chain, so any official constraints remain of limited effect on fertilisers. The AIC is continually monitoring the situation to assess the risks and the impact on the UK fertiliser sector. Despite all the efforts to keep product flowing, increased disruption is probable in the weeks ahead. Whether this stems from production, operations or final distribution, we would advise anyone who still has fertiliser to order

The arrival of a much-needed break in the wet weather arrived in March with the whole of the UK farming landscape changing rapidly over a two-week window in the run up to the Easter weekend. The threat of a large area of fallow and total UK fertiliser usage being back year on year by 10% quickly disappeared, with almost all the area planned to be cropped, finally drilled. A large area of spring cereals is now in the ground, all of which will need feeding at some point, and this, combined with the traditional grassland buyers entering the market, means the April, May and June period is set to be extremely busy. An early reset for the new season looking very unlikely today. Statistics reveal a 19% drop in imported ammonium nitrate tonnage. CF Fertilisers will aim to maintain 24/7 operation in both factories to take full advantage of cheap natural gas.

57mln t back in October. Palm oil suffered a similar spectacular collapse from highs, despite a 16% fall in production at the end of the year. This in turn stirred the palm kernel expeller market back into life following six months of depressed, tightly rangebound prices. In all, a turbulent few months to say the least, which look set to continue well into the summer as the inevitable fallout from Covid-19 starts become clear. From here we begin to look at US planting decisions and the state of the safrinha (second Brazilian corn crop) harvest to come in June.

During these unprecedented times, all nitrogen pricing today looks flat but, as demand builds, it may not just boil down to pricing, but rather the ability to deliver, as to who gets the final order at the farm gate. CF is producing tonnes of quality N, NS and NPK grades and providing the best delivery service in town, which may just win them a few more orders as spring demand reaches its peak in a few weeks.

ADM 365

Helping farmers optimise trading account management

ADM Agriculture has launched an innovative web-based platform that gives farmer customers instant access to their trading accounts, enabling them to track and manage crop sales and seed and fertiliser purchases as effectively as possible.

ADM 365 marks a significant step up from the Gleadell Xtra and Xtralite services that many of our customers were familiar with. It will continue to evolve to reflect our farmer customers’ ongoing needs to help them manage their accounts as effectively and efficiently as possible.

ADM 365 – key areas in detail

ADM 365 is an easy-to-navigate portal that can be used on any computer, tablet or mobile phone, putting farmers in control of their ADM Agriculture account at any time, wherever they happen to be.

ADM Agriculture intends to roll out the portal to feed division customers in due course.

Users are presented with headline details for each contract, including number, period, price type, price and specification, as well as contracted tonnage and remaining tonnage (tonnage not matched).

It provides a confidential all-round account management package that is tailored to individual farm business needs.

ADM 365 • Available 24 hours a day and 365 days a year • Use on computer, tablet or mobile phone • Personal data secured with two-factor authentication • Manage contracts, weights, movements, deliveries, sample results and more.

Collection data can also be viewed in a separate section of the portal, which is useful for planning and for keeping on top of movements when more than one contract is being executed in a given period, perhaps at different locations. Storage locations can also be logged and tagged as sold and unsold. All parcels can be recorded and matched to samples taken at harvest to minimise the chance of claims and rejections. End-user samples can also be stored in the portal. Grower profile contains farm cropping information that can be updated throughout the season to produce predicted tonnages. Actual harvested tonnages can be recorded at harvest.

Data is protected via a secure two-factor authentication process. The portal is currently populated by the customer’s farm trader, but there are plans to enable farmers to edit their own business information, contact details, and target prices.

Price alerts can also be set up, whereby farmers can set a value for their grain, oilseeds or pulses in any month. Once the price is reached, they will be notified by text or email and their farm trader will follow up with a call to agree a sale or set a revised target price.

ADM Agriculture Ltd Tel: +44 1427 421200


Collection data and payments for each contract can be accessed by clicking on icons beneath the main details, and there is an option to download pdf copies. Seed and fertiliser contracts have similar dedicated sections.

Key areas within ADM 365 include: • Farm business account details, including customised information such as preferred hauliers and loading availability • Completed, current and future contracts listed by harvest year • Collection data and payments, which can be filtered by commodity, date, address and haulier • Storage locations matched to samples to minimise the chance of claims and rejections • Farm cropping information - predicted tonnages and harvested tonnages • Price alerts for grain, oilseeds or pulses in any month.

Lindsey House • Hemswell Cliff Gainsborough • Lincolnshire • DN21 5TH

Contract details are listed by harvest year, providing a comprehensive record of current, future and completed purchase contracts that can be accessed via a search function or simply scrolling/swiping through the list.

Follow us on Twitter @ADMAgriculture

* For more information and to sign up to ADM 365, please contact your local farm trader. Graham Atkinson, managing director