Gleadell Viewpoint Spring 2016 by Gleadell Agriculture

ISSUE

Gleadell Agriculture Limited

Viewpoint SPRING 2016 • SERIES 2

Inside this edition of Viewpoint Market Outlook Pages 2 and 3 From feed wheat to malting barley, and from OSR to oats and pulses – Gleadell’s crop experts provide a steer on the twists and turns of the market.

A big decision – whichever way you look at it On June 23rd the UK electorate will have the long-awaited chance to vote on whether we stay in or leave the European Union. One of the founding principles of what began as the European Economic Community was to ensure that, following two devastating world wars, Europe would never again be torn apart by political discord. A further key principle was that Europe’s people would never be allowed to starve again. For this reason, agriculture and the production of food – in other words the Common Agricultural Policy – has been and remains a vital part of overall EU policy. Critics of the EU are not hard to find in the agri-business sector. In the combinable crop arena we have seen our industry handicapped by intrusive, non-science-based product withdrawals, by a refusal to adopt new technologies that are embraced in other countries and by red tape seemingly created to make running a profitable business almost impossible on occasions. However, it is also very important to acknowledge the benefits of having tariff-free access to the European single market and, via

the EU, advantages from many other trade agreements around the world. Conversely, the ‘leave‘ campaign says that any UK government, even a cash-strapped one, could be relied upon to support British farming in a post vote-toleave scenario and that other EU member states, and other countries around the world, would all swiftly agree to sign up to trade agreements with the UK in a post-Brexit world. The problem is that none of this is backed by facts or by stated intentions from our trading partners that they would be willing to accommodate the UK’s wishes so readily. There is also a danger that, if we want to have the same access to the EU market as we have today, we would firstly have to abide by EU rules and regulations and secondly have to pay, as Norway does, for access to the single market. For many, especially with regard to an emotive issue such as Europe, the way one chooses to vote will be based as much on emotion as it will be on business reasons or facts. Sometimes the devil you know is better than the devil you have yet to become acquainted with. This thought may warrant careful reflection in the context of this referendum, especially for the agricultural industry. David Sheppard, Managing Director, Gleadell Agriculture

RAGT – cutting edge science driving yield and quality Pages 4 and 5 RAGT is at the forefront of gene marker technology. We review the way this innovative business is translating high level scientific expertise into practical reality with highly respected new variety Skyfall and even newer RGT Illustrious, both of which deliver in today’s demanding market.

The Gleadell Small Seeds Website service Page 8 Simple to use, convenient and already highly popular. Gleadell’s new small seed service provides farmers and growers with easy, online access to a whole range of crops: including game cover, greening options, environmental crops, grasses and forage. Over 50 different varieties all in one place.

Market Outlook Spring 2016

Oilseed Rape South America appears to be well on its way to gathering a very large, if not record, soybean harvest, replenishing global supply. Soybean export pace/demand has been strong. Beans have been crushed to fill the gap in the vegetable oil sector, which was caused by smaller crops of rapeseed and cottonseed and production problems with palm oil. Although rapeseed is fundamentally in tight supply it cannot avoid the global fall in commodities/oilseeds. In the UK, farmers were largely insulated from falling rapeseed futures by the stronger

Organics

Pulses

Organic prices are retaining good premiums over the conventional market and domestic crops are well supported by end users keen to cover their forward positions.

The 2015/16 season saw a substantial increase in pulse supply year-on-year and it appears a similar area is likely for 2016/17. The market has adapted well and only a small carryout stock is likely.

Feed wheat and barley are competitive against imported grains and premiums are available for Group 1 and 2 milling wheat of 10.5%-12.5% protein. Premiums are also available for soft biscuit wheat - it would be wise to check this before marketing any remaining tonnage. Malting barley homes are difficult to find, although opportunities may arise in forward positions due to contract shortfalls. Pulses are in good demand and premiums are attractive due to the high cost of imported soya, rapeseed and other high-protein products.

Egypt continues to demand UK beans of the right quality and this is expected to continue next season. However, the increasing availability of beans from origins such as the Baltic states (replacing supplies from France) is starting to weigh heavily on our market. On the plus side, there are signs that the currency restrictions in Egypt are starting to wane. UK beans are currently $40/t cheaper than this time last year, although buyers appear very relaxed.

euro/sterling rate, which added back about ÂŁ25/t. At the time of writing (early April) bean and palm oil prices are climbing and crude is back above $40/barrel. Soybean futures have mounted a 50-cent rally and managed money holds net long positons in oilseeds for the first time in several months. Looking to new crop we have the Brexit vote and the unknown implications for currency, the European and US harvests to get through and the big question - where will crude oil be in six months? Soybean stocks in particular are currently ample, but market sentiment and therefore prices, can move extremely quickly. Chris Wood, Oilseeds Trader

Oats The old-crop oat market remains tight as demand for finished products, particularly from Asia, continues to drive the market. Harvest 2015 produced good quality grain and above-average yields in many areas. Mascani and Dalguise are fetching a premium over other varieties. There are a number of new winter varieties in the pipeline which have yet to be proven in volume through the mills.

Milling oat positions remain available for spot and forward movement and premiums are available for good colour, including varieties that are slightly discoloured with a high kg weight.

UK feed compounders have reintroduced pulses into animal feed rations in reasonable volumes for the first time in many years, but prices must remain competitive with other proteins.

Official planting figures released in March for England imply a reduction of 35,000t of winter oats and for Scotland an increase of 5000t. With the current tight supply and the expected increase in spring plantings, the eventual yield and quality will be crucial to balance the books.

Brian Wilburn, Organics Trader

Lewis Cottey, Pulses Trader

Robert Leachman, Oats Trader

This season has produced another glut of grain with every major producing area enjoying problem-free harvests. With Brexit looming and 2016 crops far from being safe, there are still uncertainties regarding new crop price direction. We have already seen a dramatic move down in grain prices and this may not be over yet, but markets are cyclical and at some point prices will recover. However, given the size of world stocks it is difficult to advocate a significant uplift in prices without a crop problem or some major geo-political event, but both these may happen, so the need to be connected to the global market has never been more important. Jonathan Lane, Trading Director

Feed Wheat

Milling Wheat

Amidst a bearish global macro-economic outlook, slumping oil prices and a general commodity oversupply, prices have fallen steadily in recent months to hit new contract lows.

UK milling premiums have stagnated in the first quarter of 2016 at around £10/t over feed wheat. This relatively weak premium has stemmed from an oversupply of quality grain, against relatively low miller demand in the forward months.

Although values have since bounced, supported mainly by unfavourable new crop weather in the US and India as well as bouts of short-covering by fund investors, market fundamentals remain bearish. While production for 2016/17 is expected to fall, due to a lower area and a projected return to more average yields, forecasted record global wheat stocks should ensure that total availability will remain at an all-time high. This would keep export quotations aggressively priced for this marketing season and during the early months of the new one. Looking ahead to 2016/17 in more detail, a reduction in plantings of 5-20% in the Black Sea region and crop damage in India are expected to produce the first fall in production for four seasons. EU production is also forecast to fall,

Malting Barley The world’s malting barley supply is tightening, due to a combination of poor Southern Hemisphere harvests and a forecasted 10% increase in beer sales over the next five years or so. However, the EU has ample malting barley stocks and, with the 2016 spring EU area forecast to be similar to last year, the potential for another big EU crop surplus remains. Any increase in premium or price is likely to stem from a major malting crop problem or a rise in the feed base value.

down 3-4% on the year, with UK output down about 1mln t, due to a smaller area and yields below last season’s exceptional results. New crop prices already carry a level of ‘risk premium’ so growers must be wary of the ‘lower crop, higher price’ scenario. As mentioned, the increase in stock will more than offset the perceived fall in production. Given the uncertainties hanging over the grain market, growers need a defined marketing strategy that reduces risk. Supply and demand currently remain bearish so any nonfundamental rallies should be deemed potential selling opportunities. David Woodland, Trading Analyst decade ago, partially driven by the challenge of managing blackgrass (the Scottish area has remained reasonably stable). Better malting barley quality and higher yields mean 500,000t+ UK surpluses are not uncommon. Currency and export are now major influences on price, so choosing the correct variety for your local market/land type is crucial. With so much supply chasing fewer homes, committing as soon as a suitable buyback contract becomes available is key to successful marketing.

Looking forward to new crop, the overall Group 1 and 2 market share for 2016/17 has increased by 7.4% compared with last crop year to reach around 30% of the total wheat area. Skyfall seed sales have increased by over a quarter to 9.3% of UK wheat sales, giving it the largest market share for any group 1 variety. KWS Lili has surpassed Cordiale as the Group 2 variety with the highest market share. It should also be noted that both varieties are relatively high yielding milling wheats. As breeding developments continue apace, we face the prospect of a significantly higher area of milling wheat sown with higher yielding varieties. This, coupled with a projection of static miller demand, is leading to early indications of new crop milling wheat premiums at circa £15/t over feed wheat. However, as growers will be aware, the key driver of this will be in the final months of the season, when weather conditions will be crucial in determining final yield and quality levels. Jeremy Pope, Milling Wheat Trader

Stuart Shand, Sales Director

These are challenging times for malting barley growers. Market dynamics have changed significantly in the past 10 years and fewer buyers are selling into a very-price sensitive global market. The English spring area is forecast to rise a further 10% in 2016, 90% higher than a

RAGT Breeding for Quality and Yield The UK has seen a shift into quality wheats thanks to new varieties that deliver significant yield advances with excellent bread-making characteristics. RAGT is at the forefront of these developments, as wheat breeder Célia Bequain explains A quarter of a century ago, our predecessors decided to focus on breeding for quality. Thanks to them, and the dedication of the RAGT team since, our wheat breeding program is now delivering considerable commercial success. Skyfall, a breakthrough combination of high yield and excellent quality, accounted for 10% of certified seed sales last autumn, its second year of commercialisation. New arrival RGT Illustrious, fully recommended on the 2016/17 list, is also set to take a significant slice of the market. Thanks to its Hereward-like quality this variety recently gained full nabim approval as a bread-making variety. Our success is based on appropriate parent choice, intensive field trialling and testing of dough characteristics. We have also pioneered the use of new genotyping tools that use stateof-the-art DNA markers to select the most promising traits. RAGT’s breeding program focuses on three key areas – yield, agronomics and quality. The longterm focus is on “farmer-friendly” varieties with solid and durable agronomic packages, such as Tuxedo and Relay and now Skyfall and RGT Illustrious.

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Yield A bread-making wheat must have a solid foundation of stable, competitive yield to succeed. RAGT runs an extensive trial network that tests advanced lines across Europe and the UK. Advanced DNA analysis pinpoints positive yield genes early in the breeding process, with a focus on those least affected by varying environments.

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We also identify how the genetic make-up of a wheat line will translate into physical traits in the field or lab – its phenotype. These traits include disease resistance, yield and quality characteristics such as loaf volume.

Agronomics A successful wheat, particularly a bread-making wheat, must have good resistance or tolerance to stress, whether due to pests, disease or environmental factors, to minimise the amount of energy diverted from grain filling. RAGT wheats are notable for their durability. We screen for key diseases across our European stations. Septoria tritici and brown rust are the focus in France, Fusarium head blight in Germany and all diseases in the UK’s highly pressured environment. Resistance genes are identified and their value assessed before being moved into new varieties as a gene stack to improve the durability of the resistance.

RAGT Wheat Breeder Célia Bequain

RAGT is a pioneer in the use of gene marker technology to solve the complex interactions within the DNA code that determine yield and quality.

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Gleadell – a key supplier of RAGT varieties

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As a key supplier of new varieties to our farmer and consumer customers, it is essential to be able to access the best genetics from all resources.

Quality RAGT breeds varieties with a clear end-user interest. Consistency of the end product is key to ensure both grower and end user get the best return on their investment. In addition, we have close relationships with several key millers and bakers to help assess suitability of varieties across seasons and locations.

Marker technology The selection of key traits in breeding programs has been greatly simplified thanks to cuttingedge marker technology that identifies sequences of DNA code in genes that confer these traits. Both yield and quality are extremely complex traits controlled by numerous genes with large and small effects. However, new marker technologies allow us to accelerate the rate of gene discovery, while field screening and testing in our analytics labs confirm breadmaking quality. This also helps validate the link between molecular markers and bread quality characters. RGT Illustrious demonstrates what this technology can produce. RGT Illustrious’ parents, Qplus and Battalion, were average Group 2s with moderate grain quality. Yet RAGT has selected an exciting combination of positive attributes to improve grain quality and baking performance. Of course, breeding wheats is one thing – getting them to the market-place is another. Close ties with seed merchants are vital, and Gleadell is a key partner for RAGT. The company has been instrumental in assessing and relaying the attributes of several important varieties in recent years, not least Skyfall and now RGT Illustrious.

Through our collaboration with RAGT, we can ensure marketleading wheat, barley and oilseed rape varieties that deliver addedvalue agronomic or downstream traits are made available to the industry as quickly as possible. As plant breeding technology advances at a rapid pace, it becomes even more critical that the supply chain is functioning ‘as one’, as new developments can be delivered to farmers and end-consumers far quicker than say a decade ago. A great example of the collaboration comes in the form of RGT Illustrious, continuing the trend set by Skyfall. We see a very bright future for this variety, with its unique combination of high yield, excellent agronomics and quality. RGT Planet has great potential in the spring barley brewing sector, and we are also supplying the new exciting winter OSR hybrid RGT Windozz. This top-yielding variety for the East/West region features excellent gross output potential, early autumn and spring vigour as well as early maturity. Rob Hiles, Commercial Director 5

The Seed Report

Low-risk wheat varieties are the key to success in autumn 2016.

Chris Guest Seed Manager

Relative Risk Analysis Chart

Other key varieties to watch OSR • RGT Windozz, the highest yielding hybrid on the East/West RL list • Incentive – ‘Mr Consistent’ – the new farmer favourite • Campus, the number one conventional • DK Exalte, high yield potential, outstanding disease and pod-shatter resistance • Dariot, new from DSV, rapid autumn establishment and excellent disease scores.

AHDB Recommended List

Relative risk is not a new concept – we first started talking about it with varieties such as Warrior and Cougar. A variety’s percentage yield at risk of disease, and its treated versus untreated yield used to assess that figure, are key factors in determining overall relative risk. However, a new initiative from AHDB has really moved this assessment forward and is something we all should consider given current commodity prices, agro-chemical registration challenges and resistance issues. The key question posed is what is the variety’s genetic potential in the face of disease? This is answered by examining agronomic merit derived from various Recommended List scores and untreated yield and charting the varieties accordingly. All the new varieties we mention below fall into the low relative risk category. We will certainly be advocating the use of this initiative for selection in autumn 2016. Group 1 newcomer RGT Illustrious has already created quite a stir in the milling sector and recently gained full nabim approval as a bread-making wheat. It has improved disease resistance compared with competitors and would make a nice partner to Skyfall or Crusoe.

Group 2 welcomes possibly the most exciting new variety, KWS Siskin. This is the equal highest-yielding variety on the new RL for the East region, but has additional marketability and one of the best disease-resistance packages available. KWS Siskin should be on every grower’s radar – low-grade milling or UKP premiums will be an added benefit. Group 3 newcomers KWS Barrel and KWS Basset are solid all-rounders – being Viscount and Scout crosses respectively they feature solid agronomics, high yield potential and good grain quality. Seed availability will be limited for autumn 2016, but they could eventually start a swing back in favour of the soft milling sector. The Group 4 sector features four new arrivals. Two of particular interest are Graham and KWS Crispin. Growers in the west should head straight for Graham – it has the highest yield in the RL West region plus outstanding Septoria tritici resistance, early maturity, stiff straw and good grain quality. KWS Crispin is a Conqueror cross which looks excellent in the late-drilling slot. The variety has excellent disease resistance and features OWBM resistance.

Winter Barley • SY Venture – still the ‘go to’ winter malting barley • Hyvido Bazooka, barn-busting yields, highest-yielding barley on the RL • Hyvido Sunningdale, one to watch, candidate hybrid with excellent disease resistance.

The Fertiliser Report

Will anything move us away from the supplydriven environment we find ourselves in?

Calum Findlay Fertiliser Manager

Urea Ten Year Price Movement 2006 – 2016

Working in partnerships, being in control of production and distribution are paramount in today’s environment and this is very much the case here in the UK, which remains an ammonium nitrate-driven market.

Looking at the new nitrogen production capacity starting up in the next 12 months and the continued pressure on commodity prices, you could start to imagine that any change looks unlikely. Whilst that would be very good news for growers, nothing is ever certain and when observing the above Argus Urea graph charting prices over the past 10 years, you can quite clearly see that prices today are approaching support levels at the factory gate. When speculators start offering tonnes in forward positions at values well below and at numbers not seen for 15 years, some interest is bound to be created. “The market has to go down further” is a phrase I hear daily, but one should not forget that the price on farm in March 2015 for granular urea was £290/t. Is it ever a bad decision to take at least some cover for the new season in a market that has already seen a substantial fall of over 30% and when prices being offered are at historical lows?

One thing is certain, the market will not keep falling forever. A number of factors could indeed change the outlook and while we have new capacity coming on-stream in higher quantities than usual in 2016/17, in the Middle East/North Africa, Russia and Southeast Asia to name a few, history only confirms that what is planned may not actually happen when forecast. Producers in some areas will be, or are already at, the cost of production and so the threat of mothballing high-cost plants becomes a reality. The autumn of 2008 reinforced what could happen to prices when, following a period of plant closures, a sudden increase in demand appears. Supply interruptions stemming from political unrest continue in North Africa and, as the summer months approach, the inevitable pressure for air conditioning will continue to divert gas supplies away from urea production.

As CF Fertilisers, Gleadell Agriculture’s partner, continues its drive to make “Blue Bag“ the first choice for all UK farmers, the focus is now very much upon operating both plants at Ince and Billingham at near to capacity. Fertiliser use is very time-sensitive and product inventories have to be staged in the market. The new season campaign debate has already started. Our view is that pricing will need to be attractive to gain traction.

Downward pressure on grain prices globally has led to a delay in purchasing, but this ‘just in time’ approach to ordering only adds to the pressure on deliveries and pricing. In conclusion, volatility is set to remain and we continue to advise growers to do their own sums and if they work, manage the risk.

Gleadell Small Seeds Website Quick and easy access to a wide range of crops

Gleadell has developed a simple-to-use e-platform which includes more than 50 different products for sale covering the small seeds sector. These include game cover, greening options and environmental crops, grasses and forage, which can be ordered at any time of the day or night, so there is no need to wait for our offices to open. We like to think we have compiled one of the widest ranges of game cover options available in one location, perfect for busy farm managers and shoot managers.

As regular readers of Viewpoint will know, Gleadell has a long-established name in the arable seed sector and we are really excited about extending its recognised high quality and service focus into the wider seed sector. Ensuring the site is simple to use and works across all devices was a critical area of focus. Provided you have an internet connection you can place your order in the office or whilst mobile, paying by debit or credit card. Current Gleadell customers can pay by account, and receive invoices in the normal way. For anyone unsure on exactly what they require we offer product descriptions and outline the role each should play, we also provide a crop selector table providing information such as pack size, crop purpose (cover, feed or nectar), utilisation period and crop duration, as well as agronomy notes on sowing dates and seed rates. If you are still unsure you can speak directly with a fully qualified expert. All orders are normally delivered within 48 hours. Within the site there are options available to satisfy new and existing Countryside Stewardship agreements, either part of ELS/ HLS or the new mid and higher-tier options. The grass seeds range includes short, medium and long-term leys, as well as specific haylage and silage mixes and equine leys. Forage crops include rape, kale, fodder beet, stubble turnips and root mixtures.

The green-manuring mixtures are also set to be popular this autumn and we have a wide range of options that include species such as black oat, forage rye, vetch, mustard and the newly allowable fodder radish.

Chris Guest, Seed Manager

Gleadell Agriculture Limited Lindsey House Hemswell Cliff Gainsborough Lincolnshire DN21 5TH Tel: +44 1427 421200 www.gleadell.co.uk

A couple of product options which have been popular thus far are our Carbon/Quinoa mixtures designed for shoots across the country. The rapid establishing carbon mix, a kale/mustard hybrid and the high seed bearing quinoa, makes this a very useful mixture for many situations, providing both cover and feed in one mixture.

Please visit the store to find out more about whatâ&#x20AC;&#x2122;s on offer at http://store.gleadell.co.uk. For further information or to discuss your requirements and options for spring 2016 planting and beyond, please contact your Gleadell Farm Trader.