August Feed Wheat at £130/T, Barley at £110/T

The latest World Agricultural Supply and Demand Estimates (WASDE) from the US Department of Agriculture (USDA) were released towards the end of last week and although the report didn’t exactly bring any hidden surprises; it did confirm that the recent excitement regarding ‘potential weather issues’ in the US and Europe have certainly been overdone.

Global wheat production for the upcoming 2014-15 trading season (commencing on the 1^st July) is now forecast at 701M/T, a 5.2M/T increase on last month’s estimate. Favourable growing conditions (‘spring rainfall and a warm start to the summer’) across France, Germany and Spain have all supported the case for higher than expected yields.

As for the US, projected production is mixed; prospects for hard red winter wheat across the central plains are reduced whilst soft red winter wheat yields further south are expected to be higher than previously thought.

Combining is now believed to be ‘well underway’ in the South with 30% of this year’s Texan crop now in the shed. We are yet to hear of any ‘official’ yields but early rumours have certainly been encouraging – a dry, warm forecast for the week ahead should allow for progress to continue and the market should have some numbers to play with by this time next week.

As for maize corn, global production is forecast at a staggering 979M/T, 2M/T higher than last month’s forecast due to production increases in Russia and the Ukraine. Again, initial concerns regarding persistent wet weather have now been quashed and both are on track for a good harvest this year.

Over in the US, maize corn is developing well with 75% of the area now described by the USDA as being in either a ‘good or excellent’ condition. However ‘persistent, strong showers’ are forecast for the week ahead in the north-west and could cause some problems given the recent dry spell there.

Given the above, it is hardly surprising that new crop wheat values have come under further pressure this week. Feed wheat for as available collection at harvest is now valued in the region of £130/T ex-farm whilst movement further forward into November would offer £135/T ex-farm. Feed barley is continuing to trade at a heavy discount with as available collection at harvest now priced somewhere between £110-115/T ex-farm.

As for OSR values, £250/T ex-farm now looks like a realistic offer for August collection. Last week’s USDA report confirmed that this year’s European OSR crop should be expected in the region of 22M/T (rather than the 20M/T that was initially forecast this spring).

Furthermore, the increasing strength of sterling against the Euro is only exacerbating the problem; our UK OSR crop will need to be cheap enough to effectively compete for export sales against a competitively priced mainland European crop.