There is no normal in the current market environment, and if you are marketing your grains, you need to be fully aware of the uncertainties ahead.
Speaking to a contact in Australia earlier this week, I came to the conclusion that certainty and the grain markets are two words that struggle to be in the same sentence, comments Openfield’s head of compliance, shipping and research, Cecilia Pryce. The unknown impact of the global energy price rise may result in a ‘reset’ button being pushed when it comes to supply and demand in many sectors. The basic question from the producer, asking: “Can I afford to make a Product?” is just as important as the question asked by the consumer: “Can I afford to buy a product?” How long can these two parties afford to keep making or buying a product? But, more importantly, are the new energy prices a short-to-medium term blip, or here for the long term? We have more questions than answers, but it’s a global issue – and from where I currently sit, it looks to be a game of survival.
When it comes to commodity prices, grains and oilseeds may be necessities for survival; but as much of the world has embraced luxuries and excess in recent years, how much of that market will erode and what impact will that have on global and domestic demand for cereals and oilseeds and more directly on price? We can look at the global crop numbers and anticipated demand, but when the average UK chicken’s diet is around 57% wheat, it doesn’t take a huge drop in
that demand to a ect the demand for grains.
In fact, if the demand for feed in July was extrapolated forward for the whole crop year, we could easily see a drop of 455,000 tonnes of wheat from animal feed alone. Times are changing and if you are marketing your grains you need to be fully aware of the uncertainties ahead. There is no normal in the current market environment, but I’m concerned that even if energy costs were to drop, that household consumption may have changed in a dramatic way.
If we see a drop, be it in animal feed demand, human consumption or industrial use, what would that mean to you, your crop and variety choice, and the way you plan to grow your crops? Fertiliser costs may be a driver for many of you when looking at eld and crop management, but I do urge you to look at forward market prices and consider o -setting some of the risk for the 2023 crop. Unfortunately, not much of the population realises just how much of a cash investment farmers need to make before their crops are harvested, delivered and payment received. I can’t think of many other industries or products that face the same challenges of initial cash outlay, weather risk and then uncertainty over final prices that are achievable or received. Many of you will manage this cash flow risk and marketing in a very professional way, but in a world of uncertainty can I ask you to consider how you market your 2023 crop, and at what point you lock in some grain sales against your fertiliser purchases.
Last March, I urged farmers to buy fertiliser and sell their remaining old crop, as prices for 2022 crop were at such a discount; but at the time of writing this feature, the spread between May 2023 and November 2023 has dropped down from a high of £70 per tonne to around £13. Think outside of the box and look around you; perhaps it’s time to be as dynamic as the market and maybe try some new things?
As natural gas prices and supply remain volatile across Europe, this has caused further curtailment of nitrogen production from major fertiliser producers, says Openfield’s fertiliser manager, Lucy Hassall. As a result of a lack of AN availability, both the UK and Europe have seen a major uplift in urea and inhibited urea purchasing, which has caused further price increases on these grades due to demand.
CF Fertilisers has announced that it will now import ammonia in order to continue running the Billingham plant to produce UK N and fulfil outstanding orders; an option that not all facilities have.
Should any offers on imported AN be available to the UK today, it is highly unlikely that any suppliers would commit to cargoes due to the level of risk at such high prices. We are most likely to see a continuation in urea supply with the inhibited urea being a more attractive option as an alternative to regular AN buyers.