ISSUE
Gleadell Agriculture Limited
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Viewpoint SPRING 2017 • SERIES 2
Inside this edition of Viewpoint Market Outlook Pages 2 and 3 Members of Gleadell’s trading team discuss prospects for the key commodity markets, providing a steer to growers looking to sell their produce.
Trading with the EU and the rest of the world Most of us have heard plenty about Brexit and the terms of the UK’s departure from the EU, without actually being informed as to what our future relationship with the EU will look like post March 2019. The sobering thought is that we probably have nearly two more years of Brexit discussions to endure before we actually leave the EU. We will need stamina, patience and our fingers to be crossed to emerge at the other end with a conclusion that demonstrates common sense and practical solutions have won the day. During this period, most of us have businesses to run and long-term decisions to make that are hard enough anyway, without the added complication of putting in place trade deals that are workable.
the day, and World Trade Organisation rules
Weetabix’s supply chain success
are applied to UK agri-product trade with the
Pages 4 and 5
If a ‘hard Brexit’ turns out to be the order of
EU and the rest of the world, then imports and exports of grain, non-grain feed ingredients and associated products will become harder and markets more expensive to access. In the marketing year 2015/16, the UK exported a total of over 5.5mln t of combinable crops,
Viewpoint takes a closer look at this iconic brand and the key role Gleadell and farmers play in making its wheat supply chain such a success.
of this trade, other than soy and associated
Seed and fertiliser reports
products, was transacted within the EU.
Pages 6 and 7
The implementation of tariffs and quotas will
New developments in Recommended List data and an update on the latest varieties; plus a look at the main influences on the nitrogen fertiliser market.
with 6.5mln t of imported grain and feed ingredients coming the other way. The vast bulk
mean not only potentially higher import and export costs, but also the likelihood of increased difficulty in being able to access other markets, or being able to secure long-standing essential supplies in the case of UK end consumers.
involved in the upcoming
Azotic Technologies – the future in sustainable nitrogen
negotiations are committed
Page 8
For these reasons, we very much hope that a free trade deal with the EU with regard to agricultural products will be possible, and that all parties
to delivering a sensible solution for the benefit of all market participants. David Sheppard, managing director, Gleadell Agriculture
A technology that could maintain, or even increase, crop yields without any of the associated disadvantages is under development. Viewpoint takes a closer look.
Market Outlook Spring 2017
Feed wheat As the marketing season draws to a close, record global grain stocks provide a level of security against a forecast of lower production in 2017. Projections of a return to average yields and a reduced planted area, primarily within the US and China, could result in global wheat and corn crops declining by 15mln t and 30mln t respectively, although inventories will keep overall availability at a record high. EU production is expected to rebound after this season’s problematic harvests, as limited winter-kill and the favourable weather outlook support crop development and yield potential. The majority of that increase is in France, which should allow that country to regain its traditional export destinations, lost this season
Although EU exports are expected to increase in 2017-18, they will still face stiff competition from the Black Sea region, where another large crop is forecast. Increasing stocks, especially in Russia, should keep the area’s exports aggressively priced. The AHDB’s recently released planting survey suggests the lowest UK wheat area since 2013, which, if last season’s yields were repeated, could tighten the UK balance sheet further. Due to the upcoming uncertainty as the UK commences its discussions on leaving the EU, currency movements will play a major role in the value of UK exports and imports. The factors of a weaker currency and a tight balance sheet have insulated the UK grower from generally bearish global market dynamics in recent months, and these two factors will bear close analysis over coming months. David Woodland, trading support analyst
Organics
Pulses
Oats
Organic prices remain firm, at a significant premium over conventional prices.
Large blue peas are in tight supply with no carryout expected. Marrowfats, on the other hand, remain oversupplied and difficult to place.
The 2016 harvest
Demand from Egypt for UK beans is down by as much as 50% compared to last season. Australia’s record crop has exerted downward pressure on prices and had, until recently, completely eroded the previously significant premium its beans had commanded over UK prices.
across all varieties, as
End users are finding homegrown supply very difficult to source and are looking at imports to cover their positions, although these are also proving difficult to find. Home-grown protein crops are in good demand, whether for human consumption or feed compound use, driven by very high prices for soya, rapeseed and sunflower cake. Malting barley continues to be supported by domestic and continental maltsters. Milling oats with good colour and bushel weight are in short supply and any tonnage left on farm will be well received. Other feed crops will continue to be supported by end users throughout the rest of the season. Currency will remain a big influence on organic commodity markets. The UK is a net importer of all organic cereals, pulses, and proteins, so prices are geared to the cost of imports. Efforts are being made to increase domestic supply, but this will take time. Brian Wilburn, organics trader
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mainly due to a lack of quality.
It is therefore unsurprising that North African buyers have favoured the superior quality of Australian beans. However, given the limited supply of UK beans it was unlikely we would have been able to meet any extra demand. Fending off increasing competition from Baltic countries and Australia is likely to be our biggest challenge next season. Fortunately, strong demand from UK feed compounders is likely to continue. That said, if the general bearish outlook for other protein sources proves correct, pulse prices may come under pressure. Lewis Cottey, junior trader
produced a significant variation in quality, with specific weights ranging from 46 to 54kg/hl well as lower-thanexpected yields. Questions therefore have remained through the season as to whether the supply of milling oats can keep pace with demand. Adding to this uncertainty, DEFRA’s March supply and demand report reduced oat production and import figures compared with the December forecast. Consumption was slightly increased. This adds further questions over supply going into the end of the season, providing further support for domestic oat prices. This firmness has rendered English milling oats uncompetitive for export and the market remains finely balanced.
Jeremy Pope, junior trader
Uncertain times reinforce the need to find stability, and choosing the correct trading partners is key. The recent demise of a medium-sized UK grain merchant has left some farmers, merchant trading partners, hauliers, and end users with potentially significant financial losses. We would always recommend ensuring that the company you sell to has the financial strength to be sustainable, even in difficult times. Gleadell is a strong company in its own right, but that strength is reinforced by the company’s two blue-chip equal shareholders, ADM and Invivo. Jonathan Lane, trading director
Malting barley
Milling wheat
As the UK spring malting barley area continues to grow, and volatility and uncertainty increase ahead of Brexit, it is crucial that growers monitor market developments in the months ahead.
Milling wheat premiums have maintained a downward trend in the UK throughout the 2016/17 season. With recent months seeing little to no change, premiums stand at £4-6/t over feed wheat nationally.
As the world’s third-largest producer of malt, the UK is well placed to weather any potential Brexit impact, albeit our preferred solution would of course be a free trade deal. 85% of our malt is used domestically, and the 15% we export is primarily sold outside the EU.
These single-figure levels reinforce the market dynamic of both ample UK milling wheat supplies, following the highest milling pass rate for almost a decade, and the firmness of feed wheat premiums across the country.
The beer that the malt produces is mainly consumed within the UK, but malt destined for whisky use could be price-sensitive to any Brexit effect, as the EU is one of Scotland’s biggest markets. Although we don’t know the implications of Brexit, there is in principle solid fundamental demand for the 3-400,000t of UK malting barley exported to the EU every year.
This is mainly due to the success of craft beers, which use up to eight times as much malt as some branded lager, and rising demand from a growing world population. Boortmalt and Holland Malt are expanding their EU malting capacity, adding over 200,000t between them. With an increasing UK spring barley area and a top-quality product, we are optimistic that the UK will continue to be a driving force in the EU malting barley market. Stuart Shand, sales director
Oilseed rape
This forecasted rebound is taking place amidst an uncertain geo-political background. Bird flu cases appear to be expanding and Chinese pig and poultry numbers continue to decline. This year’s reduction in OSR output in Europe required a sharp increase in third country imports and this has happened, or is happening. The EU balance sheet now looks more than comfortable. At the time of writing there are no weather threats and we are pegging EU production
A look forward to new crop shows early bearish sentiment towards UK milling premiums, mainly because about 40% of 2017/18 winter wheat plantings are expected to be milling varieties. This certainly isn’t positive news for new crop premium direction. That said, over 8% of these plantings will be made up by the new Group 2 variety KWS Siskin and, given historically low premiums this season, it is difficult to predict what percentage of milling wheat will be grown with the intent of making full specification.
The South American soy crop could produce 13.5mln t more soy than last year and there are many talking up US production by 2.5mln t. Output of other oilseeds is expected to rise 10mln t year on year and palm oil’s cyclical uptrend could add 5mln t.
The UK’s July-Jan import figure suggests we are likely to match last season’s 1.5 mln t total, although this figure does include a 15% reduction in German imports, highlighting the weakness of sterling following last summer’s Brexit vote and re-emphasising the abundance of UK 13% protein milling supply.
for next year at 21.6mln t, up sharply from this campaign’s 20mln t production. Given the potential static demand, prices may well continue to slide, albeit from comparatively high levels following the sharp rally in global oilseeds prices over the past 18 months.
James Forster, milling wheat trader
UK farmgate prices will be directly affected by the relative strength of sterling, but with all the political turmoil created by Brexit and elections in the EU, the medium-term outlook for our currency is tough to call. Managing price risk remains key to crop profitability. Jonathan Lane, trading director
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Weetabix – proud to partner local farmers Hitesh Bhatia
Weetabix Food Company makes Weetabix, the UK’s number-one-selling, most trusted and most recommended cereal. It is also home to many of Britain’s most famous and iconic breakfast brands including Weetabix Minis, Weetabix Protein, Alpen, Weetabix On the Go Breakfast Drink, Ready Brek, Weetos and the popular Alpen bars, writes Hitesh Bhatia, strategic sourcing manager at Weetabix. Weetabix Food Company has been proudly fuelling families around the world for over 80 years with nutritious cereals and snacks produced in Burton Latimer and Corby, Northamptonshire. The company has operations in North America, South Africa, Kenya, Germany and Spain and exports to more than 80 countries around the world.
Recent significant investment in Weetabix has enabled the company to grow internationally, especially in markets such as China. At Weetabix, we are committed to bringing better breakfasts to more consumers with our great-tasting breakfasts.
The Growers Group
At Weetabix, we recognise that if we’r consumers feel incredible inside, the q to be incredible too.
We are therefore proud to partner wit farmers within a 50-mile radius of our provide all of our wheat for the Weeta
This Growers Group is a group of envir we trust to grow, harvest, store and d essential to make Britain’s most-loved
Our commitment to source the wheat farmers located within 50 miles of Bu industry-leading Wheat Protocol. Intro seventh harvest since the Wheat Prot has been supplying Weetabix since the
Going beyond the requirements of the and Countryside Stewardship Scheme commitments to guarantee the quality ensures the protection of the local env and fertiliser usage.
In contrast to cereal manufacturers th market, we have worked closely with protocol specifying quality, consistenc sustainability of the harvest.
The partnership rewards local farmer and bringing the best quality wheat to providing Weetabix with a consistent q
Following changes to the government and ahead of the 2016 harvest, we con changes to the Wheat Protocol in orde -class breakfast for the British public.
Having agreed a series of commitmen provenance, quality and traceability of Weetabix Original cereal, we can be co 365 grains in each Weetabix biscuit is
We continue to work very closely with to help take our Weetabix Growers Gr
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Weetabix’s commitment to source the wheat purchased each year from farmers located within 50 miles of Burton Latimer is bound by the company’s industry-leading Wheat Protocol.
re to succeed in helping our quality of wheat inside Weetabix has
Nutrition Nutrition is at the core of The Weetabix Food Company and we’re proud to have been nourishing the nation since 1932. Providing a healthy, nutritionally balanced,
th a group of approximately 160 r plant in Burton Latimer who abix Original product.
and ultimately tasty breakfast that all the
ronmentally aware farmers whom deliver the finest quality wheat d breakfast cereal.
next meal.
t we purchase each year from urton Latimer is bound by Weetabix’s oduced in 2010, this year will be the tocol’s establishment, and Gleadell e beginning of the scheme.
family can enjoy, Weetabix provide that balanced boost of energy required to kick start the day and keep you going until your
Made with 100% wholegrain wheat, Weetabix is high in fibre, low in fat, low in salt, low in sugar and is fortified with iron and vitamins. In addition, Weetabix is a good source of protein, with a serving of Weetabix with milk providing 20% of an adult’s reference intake of protein.
e Red Tractor Assurance Scheme e, the protocol covers a series of y of the wholegrain wheat and nvironment by reducing food miles
t’s Countryside Stewardship Scheme, nsulted with The Growers Group on er to continue to guarantee a best-in .
The Weetabix wheat procurement model is an excellent example of a dedicated supply chain in action. It demonstrates the many benefits that close co-operation can bring, by building relationships that go beyond simple transactional supply agreements. Gleadell is proud to be working so closely with this iconic brand. As a long-term strategic partner, we ensure that Weetabix is supplied with high quality, locally grown wheat when it is required. We are also a key supplier of market information. This close relationship is key to adding value and optimising cost efficiencies for the brand. Our growers enjoy similar benefits. Dedicated supply agreements that link growers to the end user optimise risk management and streamline marketing opportunities, and lend themselves to being backed up by efficient service. The Weetabix Growers Group was established in 2010. By producing quality crops under a sustainable regime, growers have become trusted partners in delivering consumer demand for traceability and environmental care. There is no room for compromise – we need top quality wheat. Grain has to meet strict quality standards – a minimum specific weight of 72kg/hl, 15% moisture, maximum DON of 500, and no sprouted grains.
hat purchase wheat on the open these farmers to establish a strict cy, traceability, and environmental
rs for investing in higher standards o kitchen tables all around the UK, quality of wheat for its mills.
Gleadell – a key supplier to Weetabix
Growers also have to farm in an environmentally aware manner, reflecting the company’s aim to support sustainable farming practices with minimal environmental impact.
Relationship with Gleadell Gleadell is one of the biggest wheat suppliers to Weetabix, and works very
nts to ensure the safety, local of the wheat we use for the famous onfident that every single one of the top notch for nutrition and taste.
closely with the Weetabix team to ensure
h Gleadell and count on their support roup and protocol scheme forward.
insight from Gleadell to ensure that we
supply of the right quality wheat from the growers that meets the Weetabix protocol criteria. We also depend on the quality of information and market remain competitive in an ever-challenging marketplace.
Every new grower that joins the group has to meet all the criteria that underpin Weetabix’s protocol, and ongoing assessments are carried out for all members within and between seasons. The rewards are security of market, the knowledge that wheat is going into one of the UK’s most respected brands and a useful premium over feed wheat. Like all good relationships, this supply chain is based on open communication and trust to the benefit for all parties. This is the key to its success. For the past seven years we have combined our energies to help produce one of the UK’s most trusted brands, providing a springboard for further growth for all parties involved in the chain. Jonathan Lane, trading director
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The Fertiliser Report Reduction of urea operating rates has been seen worldwide. Most shutdowns have been in China.
Calum Findlay, fertiliser manager
Maximising productivity and efficiency Entering the UK in 2015, CF Fertilisers is now part of one of the largest producers of nitrogen fertilisers in the world, and working with key distributors like Gleadell has made clear its intention to recover market position in the UK. To achieve this, CF has streamlined its product range and made sure that its two manufacturing plants at Billingham and Ince can now operate at maximum productivity and efficiency.
(1) Cumulative shutdowns reported on a full year, nameplate basis (2) Turndown of operating rates includes all reported turndowns in regions which have experienced economic hardship due to selling prices, gas supply challenges, or political instability Sources: Fertecon, CFMW, Baiinfo, Fert.cn, Industry Publications, CF analysis, CF Industries Fourth Quarter 2016 Earnings Presentation
It remains clear that given the complexity of our departure from the EU it will take some time to negotiate new trade arrangements and put in place the regulations attached to any such deals. During this period, uncertainty will continue to cause volatility in the UK and European fertiliser markets. To date, the depreciation of the pound following the referendum means that imports of any inputs, including fertiliser, now cost more. We have two CF Fertiliser manufacturing plants here in the UK. They have the capacity to satisfy approximately 40% of our total fertiliser demand, producing top quality ammonium nitrate, nitrogen plus sulphur and granular NPKS compounds.
UK farming businesses will still require fertiliser imports, so the measures that are put in place when the UK finally makes an exit from the EU will remain a concern for many aspects of UK agriculture, including the fertiliser sector. One of the biggest influences in global nitrogen pricing in recent years has been China. In 2016, granular urea traded at an all-time low and, after some significant losses, 8 mln t of Chinese production has been closed permanently due to these low end-product values. High coal prices, economic hardships, gas supply challenges and political instability have also cut production in other areas. This has offset new capacity coming on stream as we enter the next campaign, so supply and demand outlook is projected as being balanced.
Ammonium nitrate has certainly displaced some urea business this season, although it should be noted that prices have not risen to the same extent in the UK as international benchmark prices. In June 2016, the early bird certainly caught the worm. CF seemed to present a winning formula and will continue to compete for business going forward, so preparation in advance is key. Gleadell has recently signed a long-term supply agreement with CF Fertilisers and we are working in partnership for future development in the UK.
World nitrogen demand is forecast to grow 2-3% per year. Its use in emission control and other industrial uses is now growing faster than agricultural use. Add to this the foreign exchange factor and any short-term collapse in urea pricing looks unlikely. The market is not expected to trade anywhere near the levels witnessed last year in the UK. In March 2017, ammonium nitrate prices traded at 50% above the June 2016 start price. We have only witnessed an increase of this size twice since 2000.
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Operating in the wider global market, CF has both the information and the ability to reflect any changes in international market conditions quickly. Prices will go down as well as up, presenting opportunities for UK farmers.
Available through Gleadell Agriculture Ltd Autumn 2017
The Seed Report (Source: AHDB)
Relative risk analysis chart Key: Recommended variety New variety O OWBM resistance
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OSR varieties to watch
LG Sundance
Dunston
Moulton LG Motown
Shabras Spyder
Untreated yield
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Britannia
Grafton Myriad
Leeds Claire
RGT Illustrious Skyfall
Evolution Relay
JB Diego Dickens
Costello
KWS Kerrin
KWS SilverstoneReflection
Zulu
KWS Siskin
Freiston
KWS Crispin Hardwicke
Savello
• RGT Windozz remains one of the highest yielding hybrids on the RL for the East/West region, with excellent autumn vigour and early maturity.
KWS Zyatt
Bennington Graham
Belgrade
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• Aquila yields like Windozz and has excellent disease resistance, including an 8 for stem canker.
Revelation
Crusoe KWS Basset
• DK Exalte has high yield potential, solid disease resistance and pod shatter resistance.
KWS Trinity
KWS Lili
KWS Barrel
• Sparrow, a hybrid candidate from DSV, has high yield potential, good disease scores and excellent vigour in autumn and spring.
Viscount
KWS Santiago 7 Cordiale
• Django, a conventional candidate from Momont/KWS, has very high gross output plus high disease ratings.
Gallant
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110
120
130
Chris Guest, seed manager
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Agronomic merit
This time last year we profiled the AHDB relative risk analysis chart, and, continuing this theme, we can examine some further developments to the new Recommended Lists data. This year wheat variety ratings for Septoria tritici are displayed to one decimal place, while yellow rust ratings are based on last year’s data, very important given the rapid evolution of yellow rust races. With milling wheats, protein contents are displayed when grown under a milling wheat nitrogen regime, aiding grower’s decisions.
150
160
170
There are no new entrants in the Group 2 or 3
• Campus was the number one conventional variety again in 2016 and its popularity is set to continue.
sector. However, KWS Barrel and KWS Bassett will be widely available for the first time this coming autumn and their high yields could prove popular. Two new soft Group 4s from Limagrain are likely to be in demand. LG Sundance is the pick of the two in the East and West regions. It has outstanding S tritici resistance, the highest on the new RL at 7.3, and orange wheat blossom midge resistance. LG Mowtown has slightly earlier maturity and again excellent disease resistance. A further Group 4 soft of note is Hardwicke, Danish bred and represented by KWS. It is short and stiff strawed with solid disease resistance
This year’s relative risk chart is shown above. The top right hand box contains varieties with solid agronomic scores coupled with high yield potential. Plant breeders are doing an excellent job of bringing low-risk varieties forward that illustrate both these characteristics.
and excellent grain quality. It is recommended
The first variety of note is KWS Zyatt, a Group 1 newcomer with the second-highest untreated yield on the RL. Having recently received full nabim approval, the variety looks set to be very popular this autumn. It has solid all-round disease scores, including 6.4 for S tritici and PCH1 eyespot resistance.
slightly earlier to mature. Both also look
for the north due to its distilling potential and will certainly fit further south. New Group 4 hards include KWS Kerrin, the equal highest yielding variety on the new RL, along with Shabras from Syngenta, which is excellent second wheats. Dunston, from Elsoms, has excellent yield potential coupled with the highest untreated yield on the list.
Winter barley • SY Venture remains the most popular winter malting barley variety. Craft, a newcomer from Syngenta, will take market share with improved yield and agronomics. • Hyvido Bazooka, a very high yielding hybrid barley variety, has excellent disease resistance and will sell out again in 2017. • Hyvido Sunningdale has equal yield to Bazooka but slightly earlier maturity and shorter straw. The go-to hybrid for the North. • KWS Orwell, the highest yielding two-row feed barley variety, has improved straw characteristics over competitors and solid disease scores, apart from mildew.
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Azotic Technologies The Future in Sustainable Nitrogen Nitrogen, crucial for maintaining crop yields, is both an essential plant nutrient and a major agricultural pollutant.
diagram 1
A technology that could have all the benefits of maintaining, or even increasing, crop yields without any of the associated disadvantages is now possible. David Dent, chief technology officer at Azotic Technologies, explains how the bacteria, Gluconacetobacter diazotrophicus (Gd), provides the solution. The benefits of bacterial nitrogen fixation associated with rhizobia living in the root nodules of peas and beans have been known for over a century. In this symbiotic-friendly interaction, the plant provides a protected habitat for the bacteria, while the rhizobia take nitrogen from the air (79% of which is nitrogen) to fix it in a form that can be used by the plant. Both the plant and the bacteria benefit from this association to the extent that legumes require little or no nitrogen fertiliser. The transfer of this within-plant nitrogen-fixing capability by bacteria to non-legumes has been attempted since the 1970s. Most recently this has involved genetic modification techniques in cereals to produce root nodules, but without any real success. However, Professor Ted Cocking at Nottingham University, inspired by the vision of Nobel Peace Prize Laureate and father of the Green Revolution, Norman Borlaug, pursued the idea of finding naturally occurring strains of Gd (normally associated with sugarcane) that could colonise different crops and fix nitrogen without root nodules. Professor Ted Cocking
diagram 1
In this, Ted has been extraordinarily successful and his approach, proven in the laboratory with crops as diverse as wheat, oilseed rape, tomato, tea, grass and potato, is now being transferred to the field and commercialised by Azotic Technologies. Gd, applied to the seed surface like traditional seed treatment products, enters the plant through the growing root (diagram 1, a and b). Gd then enters the plant cells to form a vesicle (c). Once inside a vesicle, both plant cells and bacteria divide and, as the plant grows, bacteria move throughout the plant (d). Gd congregate around the high sugar concentrations of the leaf chloroplasts as they photosynthesise, using the sugar for energy to fix nitrogen from the air to form ammonium. This is used by the chloroplast to produce chlorophyll for photosynthesis. Thus, the sugar-fixing factory of the chloroplast and the Gd nitrogen-fixing factory can sit side by side, making both processes more efficient. Gd is unique to other nitrogen-fixing bacteria as it lives within the cell (intra-cellular) and moves around the plant (diagram 2).
Gleadell Agriculture Limited Lindsey House Hemswell Cliff Gainsborough Lincolnshire DN21 5TH Tel: +44 1427 421200 www.gleadell.co.uk
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diagram 2
In field trials carried out in the UK, France, Germany, Belgium, Italy, USA and Canada, these bacteria have been shown to be able to substitute up to 50% of nitrogen fertiliser requirements. In some cases, where Gd has been used in addition to a standard nitrogen programme, they have increased yields by up to 1t/ha in maize and wheat. Recent independent quality testing from harvest 2016 (further testing in harvest 2017) has shown potential significant benefits in grain quality. Azotic Technologies has partnered with Gleadell Agriculture to develop and commercialise the Gd technology as NPN4Ž for the UK and other markets, with larger-scale trialling commencing in 2018. Widespread uptake of the technology in years to come will provide farmers with a sustainable alternative to conventional nitrogen fertilisers for nitrate vulnerable zones, reduce nitrous oxide greenhouse gas emissions and improve the quality of our waterways while maintaining or increasing yields in a range of major agricultural food crops. Stuart Shand, Gleadell sales director, has been involved in Gleadell’s partnership with Azotic since the start of the collaboration. Whilst the benefits of N-Fix technology and nitrogen usage reduction are clear in areas such as nitrogen vulnerable zones or in the organic sector, Stuart is also sure that there will be clear benefits for UK farmers, in both yield and grain quality, where a full, professionally administered RB209 nitrogen programme is also in place.