‘Pint Pot’

So here we are in the middle of May and for the majority who want their shed empty for the end of June there are approximately 6 weeks left of the harvest 2019 crop marketing year.

Our own rough on farm survey would suggest that there is quite a lot of grain out on farm that still needs to get into the ‘Pint Pot’ which was the estimated total demand/usage for UK cereals from this trading year. 

Problem number one therefore is that the ‘Pint Pot’ of demand is now smaller than it was 8 weeks ago in the pre coronavirus days, demand has fallen and the economic slump begins to bite.  Ethanol usage has tumbled, flour sales to the high street bakers and caterers has all but stopped and the amount of poultry and livestock being finished for the food chain has fallen also. The only two alternative possible solutions to this being a drop in the price in the hope that slightly cheaper demand can be found. Or, a larger than normal carryover of harvest 2019 in store to add to harvest 2020.

Problem number two, the ‘Pint Pot’ of demand for harvest 2020 is shrinking also.  As the Covid-19 and Government lock down continues all be it in an ever-softer form.  We are going to be a long way through the 2020 marketing year before demand returns to anything like normal.

No, no, you say, number two is not a problem because all the crops in the ground are poor; 2020 will be a poor harvest and there will not be enough grain to fill the ‘Pint Pot’.

Problem number three.  This week saw the latest WASDE (World Agricultural Supply and Demand Estimates) numbers.  World wheat production is put at 768.49 mmt for 2020/21 up from 764.32 for this year. So whilst in the UK and European Union production for 2020 harvest is forecast to fall by 11.78mmt, production in Russia is forecast to increase by 3.39mmt, Australia 8.8mmt, Argentina 1.5mmt, Canada 1.65mmt .  With predicted exports increased for all of these, plus Kazakhstan.

Problem number four.  Maize corn.  The WASDE placed global maize corn production at 1186.86 mmt for 2020/21, the biggest crop ever! Of this 406.29 mmt is likely to be in the USA.  Under normal circumstances approximately  33% of the US maize crop goes into the ethanol industry, but with Brent Crude and West Texas Intermediate Oils both trading at levels 60 percent below the levels of last May the ethanol industry will likely be on its knees for a while longer.  Maize will therefore be looking to compete for wheat and barley usage anywhere in the World.  Currently it can be bought ex Teesport/Immingham on an October to April basis for £156 – £158 per tonne.

Solution number one.  Sell the remaining 2019 crop wheat whilst you can still get £150 per tonne.  Making sure at the same time to sell 25 percent of the 2020 crop at £160 for early autumn, because there will be very few if any who have averaged £160 per tonne on their wheat for 2019 crop.

Solution number two.  Over year the wheat still in the shed and sell both it and the 2020 new crop for £160 per tonne.

Likely worst-case scenario – doing nothing whilst waiting for another day, or week, or month!

If I were looking at my ‘Pint Pot’ and it started at £160 per tonne, I would be thinking, it was looking half full, not half empty. Cheers.

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