The 67kg/hl bushel weight Baby

It has been another quiet, although seemingly bullish week for the grain markets over the last seven days. The November 2012 London LIFFE wheat future has continued to trade within its £10/T trading range between £197-207/T for the ninth week running, with little sign of breaking the trend.

However, after a week of generally bullish news, futures have crept towards the top end of this trading range this week, putting £200/T ex-farm back on the table for feed wheat movement next month.

Milling premiums have remained firm, with ex-farm prices slightly advancing due improved feed base values. Soft varieties are proving to be particularly popular, offering an average of a £25/T premium.

The majority of the gains were added over the weekend when the market had chance to digest some rather bullish news; the prospect of a Ukrainian export ban.

After a drought hit harvest with yields down by as much as 40% in some areas, the Ukrainian Government, who remain “intent on protecting domestic supplies” are now faced with “little alternative” but to restrict grain exports this season. The ban is so be imposed from Mid-November onwards and should (in theory) take almost 20M/T out of the global grain mix until next June.

Additionally, it is not only the Ukraine that has confirmed a severely poor harvest this week; our own ‘official’ production estimates, courtesy of both DEFRA and the HGCA were finally released on Monday.

The report (which is now available to view on our website) confirmed that this year’s wheat harvest was indeed the poorest since 1988 at just 13.31M/T from an average yield of 6.68T/Ha, almost 2M/T down on last year. Barley results are mixed with a higher drilled area compensating for generally poor yields, while OSR production is down more than 7% on last year – again a higher drilled area has marginally compensated for poor yields.

A combination of the above then has undeniably persuaded the market upwards, again with £200/T ex-farm reinstated for feed wheat movement next month.

However – and yes unfortunately for those of you with several hundred tonne still in the shed to sell, there is a slight ‘however’ – UK customs data was also released this week, confirming wheat quantities which have been both leaving, and arriving throughout the first two month’s of this season (July and August 2012). And again for you farm-sellers out there, the situation is not exactly ideal.

Last season (July 2011-June 2012) saw an estimated 867,000/T of wheat imported into the UK, and over 2.3M/T exported out of the UK. Looking in a little more detail for comparative means, in the first two months of the season (July & August 2011), 129,000/T of wheat was imported, and over 282,000/T of wheat was exported.

This season however, is shaping up to be a rather different story.

In the first two months of this season (July & August 2012), 341,000/T has already been imported (164% more than this time last year), and just 65,000/T has been exported.

If we were continue at this rate, we could ultimately see as little as 390,000/T exported, while a staggering 2.4M/T could potentially be imported – which given the figures we have seen from DEFRA, could ultimately result in a surplus.

It is of course yet to be seen how the rate of imports and exports for this season will proceed into the New Year, but judging by the quantities we have seen both arrive and leave the country in the first two months of the season, our generally below 70kg/hl bushel weight wheat hasn’t exactly proved popular. And that’s in a currently tight supply and demand situation – the turn of the New Year brings the arrival of the southern hemisphere market and thus the arrival of more grain into the global feed mix. If our wheat isn’t popular for export now, when will it be?

At £200/T ex-farm for spot collection, I’m not sure I would like to be the one holding the 67kg/hl bushel weight baby come next June.