Markets Bearish Following Release of Key Data

The last seven days have proved an interesting week for the grain markets. After a sustained period of absent market direction, the release of both this month’s global supply and demand estimates from the US Department of Agriculture (USDA) AND this season’s UK winter planting survey from the HGCA this week appears to have given the market at least some form of price direction.

Last Friday’s USDA supply and demand report gave no major changes in either the maize corn or wheat estimates. Wheat production was raised by just under 2M/T, with increases from Europe and India, while ending stocks were raised by 1.5M/T. Maize corn production was decreased by 0.5M/T, namely due to lower Argentine production following an incredibly dry February, while ending stocks were decreased by a further 0.5M/T.

For oilseeds, global oilseed production is projected at 466.8M/T, down very slightly from last month’s figure. Again, Argentine production is being held as responsible for the downgrade.

Results from the AHDB/HGCA Planting Survey for England and Wales (based on results up until the 1^st December) became available to view online towards the end of last week (please see hgca.com). Results suggest a 19% fall in the total area planted to winter cereals (wheat, barley and oats) and winter oilseeds compared to 2011 at just 2.417M/Ha.

For wheat, the planted area is estimated at 1.4M/Ha, down 25% on last year. For oats, the area planted is down a huge 30% on 2011 at 56,000/Ha. For barley (both feed and malting varieties), the planted area is estimated at 280,000/Ha, down 19% on last year. Spring equivalents will obviously be drilled were appropriate to account for the shortfall – but this sort of information will not be quantified until late April.

Subject to much criticism is the survey’s suggestion that the total planted area for OSR is 688,000/Ha, just 1% lower than this time last year. The HGCA did however add that a large proportion of this crop is expected to be abandoned due to poor weather. Again, this will not be quantified until late April.

The grain markets then, after a quiet few weeks treading water with very little market direction to follow; have had a rather interesting week. Old crop London wheat futures have fallen around £8/T over the last seven trading sessions with the benchmark £200/T just managing to hold its position for March/April collection. For those of you with large tonnages of feed wheat left in the shed, it might be worth securing some movement whilst there is still a ‘2’ in front of ex-farm values.

As for milling wheats, trade has become incredibly thin. Full specification group 1 varieties are barely paying a £15-18/T premium, whilst soft varieties offer a £10/T premium; and that’s if you can even find a buyer for the stuff in the first place!

New crop values have also retreated although to a lesser extent than the old crop values. Movement for Nov/Dec would still make £180/T ex-farm, but you would struggle to negotiate collection for any sooner at this sort of level. It is important to remember that despite the evident lack of crop in the ground here in the UK, our grain values operate in a global market. UK wheat production accounts for less than 2% of global wheat production and as a minimal exporter, it plays little part in global price direction. “The ‘look on’ around the world is far more important than the ‘look on’ out of your kitchen window” (HGCA.com).

Elsewhere, OSR values have slightly advanced back to £390/T ex-farm for spot collection this week. Favourable currency, 50+ day shipping delays in Brazilian ports and improved Chinese demand have all encouraged values once again – don’t miss the boat twice!

To view this month’s WASDE from the USDA in full please see:

http://www.usda.gov/oce/commodity/wasde/latest.pdf

To view this season’s winter planting survey results from the HGCA please see:

http://www.hgca.com/publications/documents/markets/winter_planting_survey_2012.pdf