SMARTER THAN THE AVERAGE BEAR

The New Crop wheat market appears to have stalled. After a brief rally at the end of May, the value of wheat for September move has now slipped well below most farmers perceived ideas of a good price.  Based on the values received through last year’s drought affected harvest it is easy to see why.  The price of September 2018 wheat on the 15^th of August of that year was around £180 per tonne ex farm. Currently, September 2019 wheat is some way below that figure.

The key words above are undoubtedly ‘perceived ideas of a good price’.  A quick look back over the last 15 years wheat price in Yorkshire, with values taken on the 15^th August for September movement in the same year, tell us that the low point was £60 per tonne in 2004.  The high point was £185 in 2012.  2018 ran it very close at £180 per tonne and in only one other year 2011 did wheat top £145 per tonne. The average of the last 15 years being £122 per tonne!

A look at the area of wheat sown tells us that the wheat crop in the ground is the largest area sown for 5 years.  Latest estimates place the area at 1.818 million hectares. Yet area alone tells us nothing without yield per hectare.  In 2008, we had well over 2.0 million hectares planted with the 4^th highest yield since the year 2000 and wheat was £105 per tonne. Compare that with 2.0 million hectares sown in 2012 and the lowest yield since 2000, wheat was £185 per tonne.  These though are extremes and take no account of other factors at play in the market.  Weather reports around the world, crop failures, politics home and away. In 2012 for instance the Russians place a ban on all cereal exports completely altering the global marketplace.

As a farmer you are constantly told to know your costs. How much does it cost you to grow one tonne of wheat? Well that will vary for each individual farm business and how many tonnes per hectare the wheat is going to yield in any one year.  All we know to fall back on then is history, and from that, averages.  An individual’s farm average yield over the last 10 years.  Their average growing cost over the same period and their average September wheat sales price.

The average price paid for wheat on the 15^th August for September collection in this office over the last 10 years is just over £139 per tonne!

As we get ever closer to the start of harvest 2019, it would seem to me that with wheat having only been above £150 per tonne three times on the 15^th of August in history ever! Farm gate sales above an individual’s 10-year average, especially if those sales are anywhere near £150 per tonne must surely be the ‘SHORT ODDS’ safe bet and a very good place to start the marketing year.  If you disagree pull up a chair in the ‘FARMING CASINO’, place your ‘LONG’ bet on prices up and hope that ‘Time’ brings the market your way.  The ‘SHORT’ money in the near-by is looking at crop area, potential yield, world weather and politics then betting on prices down.