Market Report wc 11th May

A wetter forecast throughout Europe added pressure to markets last week as the value of new crop began to decline before making a slight recovery towards the end of the week.  

Much needed rainfall throughout the Black Sea apparently fell last week although this is still being assessed, particularly in Romania and Ukraine were the situation is especially dry.  

Closer to home, mixed messages of rainfall throughout the UK have also blurred the market and it is difficult to gauge what is actually happening out there, especially since we can’t readily get out and about to have a good look for ourselves.  

Over on Twitter, I have seen some fantastic looking crops alongside some rather sickly-looking ones. One thing I can be sure on is that there is certainly a lot of spring barley out there! 

Old crop feed wheat is back to being offered at £150.00/T ex-farm for May collection this morning which seems reasonable given the lack of short-term demand. Feed barley has dropped back to £122.00/T ex-farm.  

£160.00/T ex-farm is once again being offered for September collection which remains a historically good value. I am constantly being reminded that we could be looking at the smallest domestic wheat crop for decades and whilst I cannot deny this, it is important to remember that we will be harvesting a very plain wheat crop amongst a backdrop of excellent grain supply throughout the Northern Hemisphere. Furthermore, the chances of historically high carryover stocks are working against the new crop market.  

Having enjoyed a plentiful harvest last year with 8.1 million tonnes of barley and 16.2 million tonnes of wheat, the UK would need a successful marketing campaign this season to deal with the surplus.  

However, AHDB have described farmer selling of wheat this year as “subdued”, as adverse weather in the autumn derailed planting intentions, giving an incentive to “over-year” grain and spread the sales across two financial years.  

Furthermore, much of the export campaign was organised before the initial Brexit deadline of October. However, as the EU and UK were unable to reach an agreement, this was moved to January. As a result, sterling began to strengthen, which further constrained exports as the UK battled to remain competitive within the global marketplace.  

Since then, the value of sterling has weakened. Between the 9th and 19th March, sterling fell 12.4% against the dollar, reaching its lowest level since the 1980’s. As this point, UK wheat exports looked more attractive and domestic prices rose, incentivising farmer selling. But has this re-energised the UK’s export campaign? 

 The export statistics for March will be released next week and this will give us the first forma insight of trade as we headed into the coronavirus pandemic. If exports picked up, carryover stocks will be less, which could ease some of the harvest pressure.  

Over the past week, Australia has stoked tensions with China by calling for an “independent probe into the origins of the Covid-19 pandemic”, worrying various China-dependent businesses.  

Beijing has pushed back on this, labelling calls for the investigation as “politically motivated” and has subsequently warned of a potential consumer boycott of Australian products – including Agricultural commodities.  

Australia typically exports around 60% of its barley, with China purchasing around 60% of these shipments. It is Australia’s biggest buyer of barley and has been for years – purchasing anywhere from $700 million to $1.3 billion dollars’ worth annually.  

Prospects for Australia’s barley crop next season were already depressed as poor demand for malting barley alongside high global stockpiles adds pressure.  

Over the long weekend, a working group of Australian grain industry bodies said it now believes China plans to impose tariffs as high as 80% on the sector.  

AHDB have this week released their March figures for UK human and industrial cereal usage. 

  • Wheat used by the UK milling industry in March 2020 as 607,800 tonnes, an increase of 12.3% year on year. Domestic wheat usage was up 14.3% and imported wheat usage was down 1.1%. Currently, season to date (July-March) usage by the milling sector is 4.6 million tonnes, a 1.5% decline on the same period in 2018/19.  
  • Barley used by brewers, maltsters and distillers in March 2020 was 161,700 tonnes, a 7.4% decline year on year.  
  • Animal feed production was up 12.6% for Sheep, 6.6% for pigs and 5.9% for poultry in March, year on year. Cattle feed production remained unchanged.  
  • 46.4% more barley and 7% more wheat was used to produce animal feed year on year. This is due to price competitiveness and clearly demonstrates the huge domestic stocks readily available. Season to date (July-March) barley usage in animal feed production is up 21.9% year on year.  

These feed production figures demonstrate the readiness of the feed industry to switch out grains depending on price – in the year previous, maize corn was priced extremely well in comparison to both wheat and barley, hence why there is such a significant jump in usage this year.  

For reference, imported maize is currently available for purchase ex Teesport at £158/T.  

Planting of both maize and soybean crops in the US is now firmly ahead of the five-year average according to the latest USDA crop progress report released last week. Over half of the maize corn crop has now been planted and around a quarter of the soybean crop is drilled.  

US farmers have already stated that they intended to plant large areas of both maize and soybeans to compensate for the shortfall in wheat. Usually, the rapid pace of planting whilst the weather plays ball significantly increases to the chances for the planned area successfully being planted.  

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