PRIVATE FRAZER

We wrote last month that the UK/Yorkshire grain trade was becalmed, locked in the grip of a Mexican Standoff.

One month on and it looks very much as though the mill consumers hold all the chips at the Casino table.  At the time of writing there is not one consumer mill in Yorkshire prepared to put a price on spot feed wheat for delivery in May or June.  Traditionally, May is a very large month for forward sales to be made into, and this year with forward values way above the norm has been no different.

Add into the equation the huge amount of maize and foreign wheat that the International trading houses have brought to the domestic market, currently over 3.50 million tonnes combined.  Every tonne of which directly competes with and removes domestic demand for UK grain. The potential for the remainder of this trading season begins to look very limited indeed.  Currently, farm stocks and supply exceed demand.  Prices for the remainder of the season look as though they will continue to fall away.

Harvest 2019 will commence very shortly and on that day the price of one tonne of unsold 2018 ‘old crop’ wheat will become worth the same as one tonne of ‘new’ 2019 crop.  But at what price?

Here is the problem.  The old crop market appears to be over supplied with 2018 crop plus imports.  New wheat, currently in the ground and drilled in perfect autumn conditions, having had a dry winter, dry early spring, and with roots chasing down for water, has just had the rain that a lot were saying it needed.  Ride around Yorkshire and the wheat crop looks magnificent. UK winter wheat area in the ground is up 4% year on year, winter barley up 15%. A potentially big crop therefore looking at us!

The sun is shining all looks well and wheat for autumn 2019 has dropped below £140 per tonne ex farm.

But??

We are no nearer to a Brexit deal and uncertainty surrounding UK global trade agreements continue.  The American/China trade war continues.  African swine fever, fatal to pigs is sweeping through China which has over half the pigs in the world. Pigs which if dead, will not be eating much! The UK bioethanol industry is on its knees and looking towards maize to prop it up.  Crop reports across Europe echo what we are seeing in the UK; large crops in the field and potentially reduced demand at the factory gate.

One final factor to take account of.  Some long-range weather forecasters are predicting a miserable UK August.  Worst case scenario for the price of UK wheat this coming autumn, all of the above plus a great pile of UK ‘poor quality’ low bushel weight, low Hagberg, high DON wheat.  It is just possible that on the August bank holiday weekend, we may be looking out of the office window at puddles, thinking we should have sold some more wheat forward in May.

In the words of Private Frazer,  We’re Doomed, Doomed!