Feed Wheat Retreats to £150/T

The London LIFFE wheat future for March 2014 closed at £149.50/T on Friday (31^st January) afternoon – £2.45/T lower than the week previous after some significant mid-week losses. This is the first time we have seen a tradable front month future slip below the £150/T mark since November 2011.

Old crop end-user bids are therefore offered lower this morning with local interest looking fairly limited. £162/T DELIVERED Manchester and £158/T DELIVERED Selby are currently under offer – ex-farm values would struggle to make £150/T against this. Movement further forward is again limited with virtually no physcial end-user interest. May/June collection would probably offer £2-3/T more than spot values.

According to the latest UK supply and demand estimates (courtesy of DEFRA), the current pace of maize corn imports could help explain the recent decline in end-user interest for feed wheat. Cumulative imports for the first five months of the current 2013-14 trading season (June-November) stand at 739,000/T and total imports for the season are forecast at almost 1.8M/T, a 15% increase on last year’s total.

Maize corn is proving to be a particularly attractive option for local bio-ethanol producers and although the quantities used continue to be a “large uncertainty for UK demand, commercial conditions and operational performance to date currently support a much higher forecast than previously suggested”. We will perhaps have a clearer idea of this over the coming weeks.

Furthermore, total barley availability continues to be 22% higher than the previous season despite the recent pace of exports. Consumption is therefore forecast higher with a larger amount being used in feed compounds than we would normally expect – again this is probably contributing to the decline in buyer interest for feed wheat.

The recent strengthening of the pound against the Euro has made these maize corn imports look to be an even more attractive option and many analysts have added that if currency continues to strengthen in the importers favour, total maize corn imports could be much higher than DEFRA’s current forecast.

As for old crop milling wheat’s, full specification group 1 varieties have maintained their £180/T ex-farm position – a good value against the current feed wheat levels. Values for lower specification varieties have however retreated in accordance with feed wheat and would make a £10-15/T premium depending on variety. Buyer interest for soft milling varieties is non-existent this morning; any local trade that offers a premium between £2-5/T should be considered as a selling opportunity.

Meanwhile, new crop values are unchanged this week with feed wheat for as available collection at £138/T ex-farm. The London LIFFE wheat future for November 2014 is currently trading at £142.75/T – against this current harvest ex-farm prices look good value. Movement further forward is limited and is struggling to make a pound-per-tonne-per-month carry beyond the harvest period.

The trade is continuing to search for even the smallest of ‘weather stories’ – not necessarily to drive prices but to add some life into such a flatly traded market. Cold weather in America, a lack of snow cover in Southern Russia and even the excessively wet weather here in the UK are all playing their part but are currently struggling to inject any excitement. The current wet weather in Brazil is also being talked of although it doesn’t look as though this should cause any serious disruptions to harvest progress.  It looks as though it will take more than the odd freeze in America to compete with this year’s production forecast.

Elsewhere, OSR values are moderately improved this week with old crop values trading in the region of £285/T ex-farm. Despite currency continuing to strengthen in the buyers favour, local ex-farm values are slightly improved due to good export demand. Canadian supplies remain landlocked, Argentinian sellers are keeping quiet whilst they struggle with their own currency based difficulties and the Chinese remain very indecisive with regards to ‘potentially GM’ North American imports. This should make way for the Australians to make a strong start to this year’s export program – and could result in European supplies picking up the short fall.