Price Pressure Continues

The London LIFFE wheat future closed at £152.50/T on Friday evening (13^th September) – £5.00/T lower than the week previous. The latest WASDE from the USDA (see below for more) is predominantly responsible for the increased pressure we have seen on London wheat values over the last seven days; poor end-user demand and a further arrival of German wheat in at New Holland dock hasn’t exactly encouraged the situation either.  

Early bids in this morning are struggling to make £150/T ex-farm for September/October collection, despite the London wheat futures opening unchanged from Friday. Movement further forward would probably make somewhere between £152-154/T ex-farm for December collection.

Full specification group 1 milling wheats have continued to trade at a £12-16/T premium to feed wheat and although we have not yet had anything bid this morning, I would imagine £170/T ex-farm would make a realistic value for the New Year.

Feed barley values are relatively poor as both carryover stocks from last year and an abundance of spring varieties continue to flood the market. Spot collection would probably offer little more than £130/T ex-farm whilst movement towards the end of the year would make £135/T ex-farm.

For those of you who didn’t receive Kevin’s cheerful Email regarding this month’s World Agriculture Supply and Demand Estimates (WASDE) from the US Department of Agriculture (USDA) on Friday morning, some of the key points are highlighted below.

WHEAT:

·         Global wheat production is raised by 3M/T to a record 708.9M/T. European wheat production is raised by 1.5M/T.

·         Global wheat consumption is lowered on reduced usage.

·         Global wheat trade (trade between countries) is forecast higher on increased demand from Egypt, Iran and Brazil.

·         Global wheat stocks are set to increase.

MAIZE CORN:

·         Global stocks are forecast 1.3M/T higher on increased production and reduced consumption.

OILSEEDS:

·         Global oilseed production is projected at 495.1M/T, a 2M/T increase on last month’s estimates.

·         USA production is forecast lower (now at harvest).

·         South American production is forecast higher (not yet planted).

·         Chinese production is predicted 0.3M/T lower due to severe yield damage caused by excess rainfall. If realised, this would be the smallest crop since 1992/93 (China are one of the biggest oilseed importers in the world).

·         Higher OSR production forecast for Europe.

·         Global stocks are forecast at 81.2M/T, 0.5M/T higher than last month’s estimate.

In summary, the USDA currently appears to be fairly well persuaded by a record feed grain harvest this season. A huge exportable surplus of maize corn is expected to be harvested in America in the next coming weeks and it looks as though it will take a fairly significant weather event to persuade the market of anything other than a potentially record crop.

The oilseed estimates are interesting – although we have an overall increase in production forecast this month, values are slightly firmer this morning. It is important to note that the forecast increase to production is for a crop which isn’t even in the ground yet – and the decrease for a crop which is currently at harvest.

A little closer to home and according to the latest harvest update from ADAS, approximately 90% of the GB combinable crop area is now harvested. “Rapid headway made in the past few weeks has meant that, despite the late start, harvest progress is now in line with that in recent years”. Yields for spring barley and spring OSR are currently above the five year average whilst their winter equivalents are currently slightly lower than the five year average – it goes without saying that both are far better than initially expected.

For winter wheat, 95% of the GB area is now harvested. The national average yield is currently estimated to somewhere around the 7.6T/Ha mark.

Elsewhere, the provisional results for this season’s Cereal Quality Survey, courtesy of the HGCA were released towards the end of last week and are now available to view in full via their website (see HGCA.com). Overall, GB wheat quality so far (as analysed by AHDB from almost 18,000 wheat samples collected up to the 30^th August), “shows a large improvement on the poor quality of the 2012 crop”. The average bushel weight is said to be 77.8kg/hl and average hagberg is said to be 334 seconds – almost 100 seconds higher than 2012 and well above the five year average4 of 263 seconds. 

AHDB have however acknowledged that a “large proportion of the samples originate from the East of England where the greatest harvest progress has been made”. The results could read slightly different by the time the entire UK wide winter wheat harvest is complete – a second set of provisional results will be made available in mid-October before the final results are published in early November.

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

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