Under Pressure

‘It’s the terror of knowing what the world is about’

‘Turned away from it all like a blind man’

‘Sat on a fence but it don’t work.’

One month on and the selected lines taken from the song Under Pressure by Queen seem to sum up the on-going events in the world at large and those closer to home in the grain trade also.

Since we last wrote in February, stock markets around the world have fallen dramatically and News commentators are talking of a 2008 style collapse. 

Oil prices this week fell to levels 30 percent below those quoted in January.

Nearer to home, May London Liffe wheat is now £5.00 per tonne below last month’s levels.  Feed barley continues to price at a heavy discount to wheat as large domestic supplies persist and large spring sown new crop expectations remain. Old crop oilseed rape is now below £310 per tonne on the farm and not even a reduced sterling v euro rate is able to hold values. 

The price of wheat around the World continues to fall as the potential impact of coronarvirus weighs on the latest estimates for consumption.

The question to be asked on farm must therefore be what to do now?  

Amongst all the talk of falling prices, little opportunities remain and should not be ignored.  Whilst spot feed wheat at the time of writing is bid at £147 ex farm, Group 1 milling wheat has traded at £175 ex farm, a whopping £28per tonne premium.  Some low grade hard and soft biscuit samples are trading between £150 and £154 per tonne.  These prices and premiums will not be sustainable moving forward. They are currently trading because the merchant trade has wheat sold guaranteed supply in the next few days/weeks and which therefore must be delivered. 

Moving forward through April into May and consumers and merchants alike are more relaxed that the market will settle and trade at lower values.  The message must therefore be, do not ignore the offer before you.  The amount of uncertainty globally must surely mean that in the short term, ignoring the fundamentals of crop size and the levels of import/exports of which we spoke previously, affecting supply and demand.  UK wheat is set to trade at lower levels.  If wheat trades lower, barley will follow, and oilseed rape is completely at the mercy of the oil price and relative exchange rates.

Unfortunately, the same holds true for harvest 2020.  A global downturn this spring in commodity prices and stock markets will only add to the futility of holding harvest 2019 crop from one marketing year to the next.  In life you can never say never, but all the odds are stacked against that being a successful strategy.  As often repeated in previous months, making a decision to put profit in the bank at £150 per tonne or above must surely to be a better management strategy than ignoring all that is going on in the world and sitting on the fence.

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