MARKET UPDATE

There isn’t too much to report this week as both old and new crop markets remain under pressure. Trade is difficult as the spread of Coronavirus continues to limit global demand in the short term and there are no major weather stories to report of.

The value of sterling is still erratic – it initially firmed at the start of the year but has since dropped. The coronavirus outbreak has caused concern surrounding European trade with China, particularly in the manufacturing sector which has subsequently knocked the value of the euro.

Here in the UK, a significant improvement in the forecast over the next fortnight (apparently) could allow for some drilling to take place although many are not convinced that it will dry up enough to form an adequate seed bed for the last of the winter wheat.

New crop UK feed wheat remains at a large premium to Chicago maize, which could incentivise further consumption of imported maize over domestic grains. Last week, the price differential between the London LIFFE wheat future for November 2020 and the Chicago maize corn future for December 2020 was £44.79/T.

A weaker pound is helping the situation this morning, as maize imports look slightly more expensive than they did a couple of weeks ago, but with such a significant price difference, it is “unlikely to affect the sentiment at this stage”.

According to the AHDB, UK new crop feed wheat futures have gained 14% since September on the back of unprecedented and relentless wet weather hampering drilling. At the same time as this, we have seen a falling global maize corn market, widening the price between the two. They added that “from experience, in this situation (when the price differential is so significant), imports of maize tend to spike, as they did in 2014 and also last year. Last year saw maize imports spike by 1.3 million tonnes – a 40% increase on the previous season”.

This morning, feed wheat is valued at £150.00/T ex-farm for April collection. Feed barley is values at £125.00/T ex-farm. For those of you seeking £130.00/T ex-farm, the pressure is on. With a potentially large spring barley crop looming, the trade could no longer justify the significant premium the old crop grain was commanding over the new.

As for new crop values, £160.00/T ex-farm is, quite remarkably, still on the table for December collection. New crop barley values are indicated at £120.00/T ex-farm for harvest collection but very few buyers are willing to commit at this stage.

Russian agricultural production has surged by 20% over the past six years and since the early 2000’s, Russian share of the global wheat market has quadrupled. Over recent years, the country has managed to secure more than half of the global wheat market, becoming the world’s biggest exporter of grain – a title which it is forecast to maintain next season.

Preliminary projections show that the grain harvest in 2020 will be the country’s second largest after the 2017 crop – warmer temperatures over the winter has meant that a larger proportion of crops have avoided frost-kill damage than usual.

Russia still has a large volume of wheat to export this season. Total grain exports for the season so far (July-Jan) are down 17% from last season at 21 million tonnes. The USDA are expecting Russia to export just over 32 million tonnes this season, which suggests that have a long way to go just yet.

As for the Ukraine, over 40 million tonnes of grain was exported in the same period, a 23% increase on last season. Exports have totalled 15 million tonnes so far (July-Jan) and estimates suggest this could top 20 million tonnes by the end of the season.

Globally, oilseed values remain under pressure due to a sudden drop in demand from China. Within the EU, imports of oilseeds have been plentiful since the beginning of the year due to price competitiveness and good availability from South America. However, availability of Russian supplies are waning and the EU has apparently reached the limit of Canadian imports due to GM restrictions, which could provide some moderate price support.

£320.00/T ex-farm is being bid for spot collection this morning.

A few interesting points from the annual USDA outlook Forum – please see their website for more https://www.usda.gov/oce/forum/2020/outlooks/Grains_and_Oilseeds.pdf

• Combined Grain and Oilseed production for the Uk and EU combined is 302.7 million tonnes – a 6 million tonne reduction on last season. The decline, which predominantly comes from wheat production falling by 5% to 137.9 million tonnes, it mainly due to autumn wet weather seen in Germany, France, the UK and Denmark. Maize corn production is set to increase by 6.5% year on year to 65 million tonnes.
• Ukraine’s grain harvest is forecast to fall 3.2% year on year to 72.7 million tonnes (last year was a record crop of 75.1 million tonnes).
• The Russian wheat crop is forecast at almost 78 million tonnes, a 5% increase on last year.
• Looking ahead to harvest 2021, the USDA are expecting to see a high volume of corn and soybean acres – this will be confirmed in the “prospective planting report” due on the 31^st march.