‘Mind yer head’

The Yorkshire wheat crop currently in the ground approaching harvest, has throughout its life from the point of sowing until today been worth on the low point £135 ex farm, to a high of £172 for November 2020.  More recently the range has narrowed. Prices quoted for November from March through to today have been £160 – £170 ex farm.  That is to say that despite all the bad news entering the market on the back of an appallingly wet autumn, reduced acres sown, spring drought, black grass infestation and crop die back, every time the November Liffe wheat value has hit £170 it has acted as a ceiling and prices have subsequently dropped back.  There have only been 11 days from September 2019 – mid July 2020 when November Liffe wheat has been worth £170 or just over.  Only 11 days during the previous 311 days.

In the latest AHDB reports they have reminded that although domestic sentiment on farm is bullish on wheat, as we head into a possible deficit of supply it is important to remember that we have entered a new marketing year that is anticipating a global surplus.  What is critical to note is that this short-term global support to the market is momentary and sentiment can quickly change.

UK wheat is currently being supported by a perceived small domestic crop trading at import parity.  Weak sterling is currently insulating our domestic market.  Several factors may come to have an influence on this. 

Sterling may strengthen relative to the Dollar and Euro if the ‘market’ thinks Brexit negotiations are favourable and offer support.

Nor can we ignore the huge world maize crop.  Currently December 2020 maize futures stand at a £58.00 per tonne discount to November Liffe wheat futures.

President Trump’s on-going squabble with China may curtail a repeat of the business China did for US maize, when the USDA reported last Friday China had made the second largest single day US corn purchase ever.  Closely followed by President Trump saying Phase Two of the Trade Deal is unlikely, as the US-China relationship has been severely damaged.  The net result which could be more maize heading our way at reduced prices.

Early UK harvest OSR and barley yield reports (Farmers Weekly & Twitter) appear not as bad as first thought.  The 2019 National average winter barley yield was 7.5 tonnes per hectare.  So far reported we have seen 7.4 tonnes in Norfolk, 8.2 tonnes in Devon and between 5.6 and 8.4 in Yorkshire. The bulk of the OSR yields reported are also above the 2019 National average.

The prices that have been quoted on farm have factored in nothing but bad news and as such UK wheat prices will remain at the top of World markets due to our potential small crop and import parity. However, that does not mean prices can run away higher and higher, it will require some major reductions in supply from the Worlds exporters of wheat and maize to push these levels ever upward.  Conversely, the slightest bit of UK wheat harvest or economic good news will potentially have sentiment changing and see us banging our head on a £170 November Liffe ceiling, as prices fall back.

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