Gleadell Viewpoint Autumn 2015 by Gleadell Agriculture

ISSUE

Gleadell Agriculture Limited

Viewpoint AUTUMN 2015 • SERIES 2

Inside this edition of Viewpoint Spring Cropping Options Reviewed Page 6

Harvest 2015 – full barns but when to sell is the key question Not many farmers will be entirely happy with this year’s harvest. Many have had very good yields, but market prices have been, and remain, disappointing; some crops have been cut with high (expensive) moisture levels and most farmers will feel they went into harvest with too little sold forward. Hindsight is an exact science and it is obvious now what action should have been taken when wheat prices were £30+ per tonne higher in the spring. No one, least of all a grain trader, gets any Brownie points or credit for being a clever dick. However, it is fair to point out that the prospect of another large global, European and UK wheat and barley harvest, in the context of large carryover stocks at the end of the last marketing season, was something that Gleadell and others highlighted for most of the last year. A reluctance to sell at prices that only offered the hope of breaking even, at trend yields, isn’t hard to understand. Not many predicted that

wheat production would approach the record yields of 2014, so it would have been brave, or even foolhardy, to have sold more than 5060% of expected crop outturn prior to harvest. However, farmers actually sold closer to 10%, relying on a weather event or political crisis to turn things around. To date only a small price recovery has occurred and the El Nino weather phenomenon has not resulted in a collapse in Australian wheat production. This season has a long way to go and the fat lady is only warming up, but surely the lesson is not to base marketing strategies on hope or wishful thinking, but on what is known and can reasonably be expected to happen. Harvest 2016 wheat prices currently command a £15/t premium over 2015 and are worthy of some consideration if we believe farmers around the world are intending to plant the same scale of crops again. David Sheppard, Managing Director, Gleadell Agriculture

With harvest now complete and the majority of autumn cropping decisions made, thoughts are quickly turning to spring, where selecting the right crop, market and variety is critical to maximise profitability. Chris Guest provides some timely food for thought, by reviewing the main options and outlining the key factors for farmers to consider prior to spring 16 planting.

Kerry – an Irish Success Story Pages 4 and 5 From a small dairy business to a major global player, all within 40 years; sounds impressive, but that is exactly what one Irish business has done. Viewpoint gives a deeper understanding about this exciting business and provides some insight into the relationship that exists between Gleadell and Kerry.

Gleadell Liquid Solutions Page 8 Is the widespread use of Liquid N about to take off? Inside Rob Buck talks about the benefits of Gleadell Liquid Solutions and why growers should consider switching.

Market Outlook Autumn 2015

Oilseed Rape The soybean market remains technically and fundamentally weak, with plentiful supply and a downtrending market. That said, these factors are well known and markets can quickly look very different. It’s worth noting soybean futures have lost over 50% of their value since the 2012 highs, when the market was extremely optimistic. Crude oil continues to trade in and around the $50/barrel level and China’s economy continues to weigh on market sentiment, posing questions for future demand.

Milling Wheat

Oats

UK milling wheat premiums have drifted since the start of this campaign, currently settling approximately £15 over feed.

Harvest 2015 can best be described as vintage in most regions except for lateharvested spring oats in some southern locations.

Quality has generally been good. Average Group 1 and Group 2 proteins are 0.5% higher than last year, at 12.7%, whilst bushel weights have averaged an impressive 79kg/hl.

Growers need to note demand for the variety they propose to grow as enduser requirements, especially in the Midlands and along the south coast, are very specific.

Hagbergs declined when wet weather hit, although 88% of all our Group 1 and 2 samples have tested above 250. Despite this potential concern, premiums have weakened recently . This shows there are ample stocks of quality milling wheat in the nearby positions at least.

Quality and yields this year have given the oat miller the upper hand and further exports will be needed to clear the surplus, mainly spring oats, but this may come at a price.

This is not a surprise, given our large old crop carry-out, the rise in Group 1 and 2 plantings and the availability of quality wheat – 56% of our Group 1 and 2 samples have met a usable 12.5/74/200 specification, significantly above last year’s 40%. Although the UK was a net importer of wheat this July, the total of 136,000t is the lowest for four years. Just 27,000t came from Germany, a third of last July’s total, highlighting the current largely uncompetitive nature of milling wheat imports. Dan Sedgwick, Milling Wheat Trader

Genuine feed oats are in short supply. The compounder requires a steady volume but this tonnage is not currently being released. Robert Leachman, Oats Trader

The oilseed rape market looked benign back in May, when we expressed a fairly neutral view, but commented that old crop carryout was large and we had no problems of note. In retrospect that old crop statement doesn’t look so accurate, mainly due to frost in Canada. Prices rose aggressively throughout the EU harvest period before an aggressive sell-off, with little change in supply-side fundamentals. In view of supply and demand we feel rapeseed is currently a supported market in a bearish environment. The road ahead will be interesting and will be all about maximising opportunities while managing risks in a volatile world. Chris Wood, Oilseeds Trader

Pulses The pea harvest produced good yields and quality. Unfortunately, this put pressure on large blue prices, though scarcer marrowfats remained above £300/t. Rains hit an early bean harvest. Quality looked variable in the early stages, with low moistures, high levels of broken and split beans with very high insect damage in southern areas. Beans in the north appear to be testing better for insect damage – high moisture is the main issue. Exports to Egypt have been brisk for material processed for containers. With bulk shipments only just starting, buyers are very relaxed, depressing values. Ian Skinn, Pulses Trader

“ Global cereal crops generally exceeded pre-harvest expectations and the down-turn in the macro-economic environment, led by the setback in China’s growth, have seen markets continue a bearish trend. Stock of wheat and corn have built to unprecedented levels and the demand side remains uncertain. The grower’s challenge is about managing risk; being aligned with an internationally connected merchant is a must.” Jonathan Lane, Trading Director

Feed Wheat

Organics

Despite weather issues earlier in the year, the reality of a third successive record global wheat crop has exerted significant downward pressure on all markets.

Yields have been better than expected this harvest, however quality has suffered where combines were delayed by rain, particularly further north.

In addition, record high grain stocks and easing export restrictions have resulted in a bout of aggressive selling, especially from within the Black Sea region.

Market prices are well supported and have not seen the losses that conventional grains have suffered.

As harvest in the north of the UK ground to a close, better-than-expected yields have produced a major bottleneck in supplies, with exporters heavily discounting prices to move tonnage. Although Southern Hemisphere crops are still not made, and the threat from El Nino remains a possibility, the recent revision for Australia’s output reflected only a relatively small reduction in crop size. Argentina’s wheat area will be reduced, mainly on weather, but also as a result of government intervention on export licences. The re-emergence of Black Sea shipments will continue to have a major impact upon EU

exports. These are currently running 25% down year-on-year and, with no signs of increased demand for either French or German wheat, closing wheat stocks are likely to rise significantly. UK yields have again been reported as exceptional and may even surpass last season’s record. This, plus old crop over-supply and limited demand, produced true harvest pressure. Firmness of sterling and a general lack of export competitiveness leaves the UK facing a daunting task to shift this potential large surplus without a major realignment in international markets or in UK farm values. David Woodland, Trader

Demand for milling wheat continues to support the market, despite lower-thanexpected protein levels. Some later-harvested crops have low Hagbergs and may struggle to find a home. Malting barley follows a similar pattern, with low germination being the issue. Bean prices remain strong due the high cost of imported proteins. Demand for good-quality milling oats continues. In general, specific weights are very good and screenings are well within specification. Premium prices are available for forward positions, including for laterharvested crops that are more discoloured but still retain a good clean groat percentage. Brian Wilburn, Organics Trader

Malting Barley The malting barley market has ground to a halt under the strain of big stocks, big malting surpluses, excellent quality and declining beer sales around the world. On paper the UK has an exportable surplus of 500,000t (although quality is mixed), very similar to the global surplus. However, maltsters secured most of their requirements on pre-harvest contracts and new demand from domestic maltsters is limited. Export demand will also be limited due to big EU surpluses and lack of world demand, especially from China, the world’s biggest malting barley buyer. The strength of sterling has also significantly reduced UK prices and competiveness, although on the plus side we do have the nitrogen level that buyers want.

With big crops forecast for Australia and Argentina, it is difficult to see how the market is going to turn around in the short term. However, a lot can still happen to the quality of this crop and any uncertainty over crop 2016 plantings or a firming feed price could quickly lift current premiums. Stuart Shand, Sales Director

Kerry Goes Further Every day millions of people throughout the world consume food or beverage products containing Kerry’s ingredients, flavours or nutritional products. Kerry provides the largest, most innovative portfolio of Taste & Nutrition Systems and Functional Ingredients & Actives for the global food, beverage and pharmaceutical industries.

Food & Beverage Heritage Kerry has a rich history within the food and drink industry. Its modest beginnings as a dairy cooperative in Ireland bestowed an unshakeable respect for real, wholesome ingredients. Kerry remains steadfastly committed to its early ethos and prides itself in delivering delicious, authentic food and beverages of the highest quality.

Staying close to its food heritage, while drawing on expertise and inspiration from all over the world, Kerry has created an organisation committed to helping delight and nourish consumers across the globe. Kerry knows that success in the vibrant food and drink industry requires an ability to stay ahead of ever-changing consumer demands, so it empowers its clients to do exactly that. Due to its reach, technology and physical infrastructure, Kerry can uncover unique consumer preferences and how they change by geography, age, gender, upbringing and biology. From research and development through to retail and distribution, Kerry can work alongside its customers at every level – bringing the service, commitment and focus of a development partner, bolstered by the resources of a global company.

Group Structure

Kerry Group is structured across t Taste & Nutrition Solutions, Consum

Kerry develops, manufactures and delivers innovative taste systems, functional and nutritional ingredients and integrated solutions for the food, beverage and pharmaceutical markets.

Kerry Foods is a manufacturer an marketer of add branded and cus branded chilled and Irish consum markets.

Insight & Innovation Ideas and inspiration for new food and beverage creations are everywhere. With operations in more than 30 countries, Kerry’s teams are immersed in the markets, cultures and daily lives of consumers. Kerry understands regional and local dynamics and use these insights to drive innovation. All of this helps ensure that the products it develops together with its customers are relevant, viable and meet consumer demand for taste and nutrition.

Science & Technology At Kerry, cutting-edge science and technology informs everything it helps to shape and create – across its entire Taste & Nutrition Systems and Functional Ingredients & Actives offering. Indoors Kerry has over 800 food scientists and product development specialists with expertise across multiple disciplines. These experts have access to the industry’s largest ingredient and flavour portfolio and an unmatched process capability. Put this all together and you get innovative solutions that overcome manufacturing challenges and meet the ever-changing needs of the consumer. A powerful mix.

From a small dairy company in the southwest of Ireland to global multinational in just over 40 years, the journey of the Kerry Group tells a story of how belief and vision were combined to create a unique company.

Kerry Foods

three business areas – mer Foods and Agribusiness.

a leading nd ded-value stomerfoods to UK mer foods

Kerry Group’s consumer foods division, Kerry Foods, is a leading manufacturer and marketer of added-value branded and customer-branded chilled foods to the UK and Irish consumer foods markets.

Kerry Agribusiness division works closely with the group’s 3,500 milk suppliers in the south west of Ireland, ensuring the efficient production of high quality milk as a source for premium quality, sustainably produced dairy and nutritional products.

Kerry Foods’ market leading brands are household names in selected EU markets where products are supplied to major supermarket chains, convenience stores and independent retailers. Kerry Foods manufactures food products across three major sectors:

1. 2. 3.

Global Technology & Innovation Centre Kerry has more than 100 manufacturing facilities spanning 24 countries. The new Global Technology and Innovation Centre in Naas, Ireland opened earlier this year to advance scientific research, innovative processing technologies and market-leading technology platforms. With interaction and collaboration at its core, this centre allows Kerry’s customers to work side-by-side with their teams of food and beverage industry professionals, developing innovative and differentiating products that can be delivered quickly to market. It completes Kerry’s research and development footprint for the EMEA (Europe, the Middle East and Africa) region, which includes a network of Regional Development & Applications Centres in Moscow, Durban and Dubai.

Dairy Meat & Savoury Meal Solutions

Included in its portfolio of consumer-branded products are over 20 high-profile brands such as Richmond, Mattessons, LowLow and Cheestrings, many of which are category leaders in the chilled cabinet. Kerry Foods is also a leading producer of supermarket private-label products, ranging from chilled and frozen ready meals, cooked meats, pastry products, cheese and dairy products.

Applications & Culinary Excellence When it comes to flavour and taste, Kerry is determined to go further and exceed consumer expectations. This is why Kerry has innovative chefs, baristas, mixologists and applications scientists working side-by-side with research and development teams. Together with its clients, they’re developing products that deliver great, authentic tastes.

Gleadell – a key partner for Kerry Gleadell and Kerry; a blossoming strategic partnership. As part of the taste and nutrition division, Kerry operates two mills in the UK, one at Gainsborough and one at Birstwith, both of which supply Kerry with a wide variety of flours for use across the UK and Europe. As a key supplier of wheat into these mills, it is important that the relationship goes beyond a simple transactional supply agreement. We have worked closely with Kerry to become a long term strategic partner, working directly with the mills on key supply and technology issues and assisting in delivering new quality materials. Gleadell has also recognised the role technology can play in business ways of working, supporting Kerry in its internal supply chain and payment functionality. Gleadell and Kerry both recognise the importance of the close partnership and co-operation; to ensure optimised cost efficiencies and value is added wherever possible. This close working relationship will allow both parties to grow our business’ together for the benefit of all involved in the chain, including our very important growers supplying quality raw materials. Rob Hiles, Commercial Director 5

The Seed Report Spring Pulses Marrowfat contracts are now all complete, but blue pea contracts are still available for two excellent varieties, Campus and Daytona. Campus sets a new benchmark in standing ability, which is likely to prove popular on farm.

Chris Guest Seed Manager

• As with the last two seasons

there is an increased focus on spring cropping options, due in part to the increasingly challenging blackgrass situation, but also to the benefits towards Ecological Focus Area requirements.

• Whilst there may be a wide

range of spring cropping options, it is more important than ever, with commodity prices under pressure, to ensure suitability of the crop and variety for your individual farm and target market.

Spring Barley Null-Lox varieties Chapeau and Cha Cha have performed well on farm. Contracts for harvest 2016 are complete, but there is an exciting pipeline of material for harvest 2017 onwards. RGT Planet, new from RAGT, is a very exciting prospect. This very high yielding brewing variety tops the RL trials’ five-year mean. In the east region it looks to be up to 10% higher yielding than Propino (from limited data). RGT Planet is under evaluation by the Institute of Brewing and Distilling, with commercial tonnages now being tested. It is at a similar stage in the German Berliner programme and is fully approved by the CMBO in France. The variety is on Heineken’s green list of preferred international varieties.

Spring bean variety choice includes Vertigo, Fanfare and Fuego. Spring pulses generally also count towards the greening options within the Basic Payment Scheme.

Spring Wheat Yields from this year’s commercial spring wheat crop are well above average. The quality benchmark is Mulika, a nabim Group 1 variety with orange wheat blossom midge resistance.

• RGT Planet is a new exciting brewing barley prospect, topping the 2015/16 AHDB Recommended List

a new dual purpose spring malting barley that will be worth ‘keeping an eye on’ as industry evaluations take place.

Concerto from Limagrain has set the quality standard in the non-GN distilling sector. Two new varieties from the same stable, Octavia and Sienna, are worth keeping an eye on.

predicted, ensuring a robust marketing strategy with ‘buy back’ contracts in place, will help to reduce risk.

• Laureate, from Syngenta, is

KWS Irina is one year ahead of RGT Planet in the UK and is fully approved by the IBD. It is also approved in France and is on Heineken’s green list. It brings good yields with short stiff straw and good all-round disease resistance.

One for the future could be Laureate from Syngenta. This dual-purpose, non-GN variety with excellent yield potential will be launched fully in spring 2017, meaing some opportunity for evaluation crops in 2016.

• With a large spring planting

• If spring wheat is your preferred choice then KWS Kilburn takes some beating, with a yield 7% in excess of Mulika.

The widest-grown brewing variety Propino will remain popular.

A new feed option for spring 2016 is KWS Kilburn. It pushes yield forward, being 7% above Mulika on the 2015/16 Recommended List. Although it has relatively tall straw, no lodging has been seen during KWS trials.

With a large spring acreage planned, we recommend growers secure buyback contracts and certainly on new malting barley varieties.

Spring wheat seed is likely to be in short supply so growers should cover requirements sooner rather than later.

The Fertiliser Report Nitrogen Use Nitrogen use increased in spring 2015 due to higher application rates in arable cropping and a continued migration from NPK to straight N in grassland areas. Going into the new season we had a flurry of ammonium nitrate (AN) business earlier than normal in May, as Yara and GrowHow reset new-season terms. June and July tonnes quickly sold out but, as combining started, August tonnage was limited. The prolonged harvest, combined with a continued easing of cereal and oilseed rape prices, resulted in the AN market levelling out and trading sideways throughout late August and the whole of September. It picked up again in October as autumn drillings continued apace.

Urea There was less enthusiasm about pushing urea offers early this season due to a lack of confidence by International traders to commit. The main focus has been very much on AN. Less than 40% of the UK urea tonnage has been covered and the window in which to ship, discharge, bag and distribute product timely to farms gets smaller. Urea, like many commodities, can move from relative stability to significant volatility, depending on gas supplies and ongoing problems in key North African-producing regions.

market. Despite this, that country will continue to have a huge influence on the global fertiliser market and price direction.

Sulphur Sales of sulphur-based fertilisers continue to increase despite a fall in the area of oilseed rape being grown. This reflects popular opinion that sulphur should be included in all fertiliser programmes.

Newsflash Newsflash Newsflash Newsflash Newsflash Newsflash In July 2015, CF Industries completed its acquisition of the outstanding interests in GrowHow UK Limited, expanding the company fully into the UK market. CF is a global leader in the manufacturing and distribution of nitrogen products, operating world-class nitrogen manufacturing complexes in the US, Canada and now the UK. Continual investment and producing for local markets are two key elements of CF’s strategic agenda. Like the Gleadell fertiliser business, all growth is sustainable and built on solid partnerships. CF fertilisers will be an integral part of Gleadell fertiliser’s future strategy.

Calum Findlay Fertiliser Manager

• Based on European benchmark

and industry market intelligence, forecasted AN price rises are likely through until spring 2016.

• Nitrate prices in Continental

Europe are rising at a faster pace than here in the UK, so once buyers return, we would expect on-farm levels will quickly move >£250/t to align with those seen in Europe.

• Urea poses a more ‘bearish’

feel, with forecast suggesting the market could move into an oversupply situation in Q4, resulting in manufactures re aligning prices to attract sales.

• Growers should look to take

cover on circa 50-75% of their nitrogen requirements over the next few weeks to take advantage and lock into current low prices and help spread buying exposure and risk.

We know also that new production plants never seem to start on time and the recent financial problems seen in China are hanging over the

Gleadell Liquid Solutions A different way to buy UAN fertiliser

Most growers are aware of the benefits of liquid nitrogen fertiliser over solid when it comes to storage and accuracy of spreading. Now, thanks to Gleadell Liquid Solutions, a novel scheme from partners Gleadell Agriculture and Bunn Fertiliser, growers can also take advantage of some of the most competitive nitrogen pricing in the market, writes fertiliser trader Rob Buck.

Historically in the UK, the new season price for ammonium nitrate has been set in May/ June and the liquid price reset in autumn at a similar price for pre-Christmas delivery. This is typically followed with a £10/t increase for spring delivery. This process does not reflect what is happening in the market. UAN is a globally traded commodity so is driven by supply and demand and influencing factors, as well as politics and currency changes. Prices move on a daily basis. As one of the leading importers of fertiliser in the UK, Gleadell can monitor global urea and European ammonium nitrate markets. This extensive market knowledge means Gleadell can agree UAN prices with Bunns. In turn, farmers can make an informed purchasing decision knowing the price they pay is competitive and without bias. They can fix a forward price any day of the year or buy on a load-by load basis, and have access to free finance within the scheme. While price is key, farmers must have product available when they need it. To ensure maximum flexibility, Gleadell puts great emphasis on service, aiming for a maximum three-day turnaround in peak time. To qualify for the liquid N plan, growers agree to a five-year contract based on a minimum of 150t of UAN per year. One or more 50m3 tanks, depending on contract tonnage, belong to the grower from day one. Rob Buck, Fertiliser Trader

Gleadell Agriculture Limited International Grain, Seed and Fertiliser Merchant www.gleadell.co.uk 8

Sussex farm manager Simon Haydon switched to the Gleadell/Bunn fertiliser plan last season. Based at Gillshaw Farm, near Rye, he grows 200ha of arable crops including bread-making wheats, oilseed rape, peas and beans. He has ordered 135t of straight 28N and 54t of 22N + 12 SO3, covering most of next spring’s requirements. “Rather than keeping a constant eye on the market I asked Gleadell to call when they thought the price looked right,” says Mr Haydon. “We then fixed the price for that tonnage. The great thing is we don’t have to pay until a month after delivery and as it arrives in several loads spread through the season, payments are spread as well. Had we had bought prilled N we would have had to pay three to six months before using it.” Service has been excellent, he adds. “I call Bunns when we need the fertiliser and usually get a delivery the next day.” As the farm is split, with land each side of Rye, to keep downtime to a minimum he has two tanks. Mr Haydon believes crop yields and quality, especially on headlands, are also benefiting from his decision to switch to liquid N. “Most fields are on the small side, and headlands make up a relatively large percentage of our ground. Yields on these areas were way down on the rest of the field, as most fields are surrounded by dykes. Now we can apply appropriate amounts of N close to the field edge and we’ve also boosted our wheat proteins by being able to apply N later in the season in a more usable form. As an added bonus we’ve freed up a shed for machinery and don’t have the security worries of storing ammonium nitrate.” Overall, Gleadell Liquid Solutions has worked well, says Mr Haydon. “I’d certainly recommend it.”