US Soft Wheats Arrive in the UK

After what feels like months of reporting on a ‘bullish’ or if not slightly ‘mixed week for the grain markets’, we have seen a fairly sharp turn of events over the last seven days. Old crop London LIFFE wheat futures have fallen around £9/T over the last week, with new crop futures falling £8/T; negotiating ex-farm values has therefore been rather difficult.

Feed wheat values have consequently fluctuated between £204-210/T ex-farm over the last week and are currently at the lower end of this spectrum. Movement further forward offers little price carry, with May collection offering barely £2/T more than spot values. Feed barley values have also retreated, with spot collection offering little over £190/T ex-farm (values which may be worth considering for you sourcing stock feed).

Milling wheat premiums have remained fairly static, but a fall in the feed wheat base has resulted in poorer ex-farm values this week. Full specification group 1 varieties are around the £230/T ex-farm mark, whilst lower specification grades and some group 2 varieties would make £3-5/T less.

With regard to milling wheat imports, we have seen a number of new arrivals to join the ever-expanding list of foreign wheats this week. High protein Hungarian wheats are on trial for milling over in Liverpool, whilst agrimoney.com have reported that a 25,000/T shipment of US soft wheat is due to arrive in early March – something which the UK milling trade has not seen for over 20 years. They added that while the trade is relatively small in the grand scheme of things, it marks the fact that our ‘domestic millers are still continuing to look for an alternative to improve flour quality’.

Last Friday (8^th February) brought the release of the US Department of Agriculture’s (USDA) monthly World Agricultural Supply and Demand Estimates (WASDE), which on this occasion contained a series of small changes to global stocks (we can often see quite sharp alterations at this time of year).

For wheat, alterations included a reduction to global production, but also a reduction in consumption, which ultimately left wheat ending stocks virtually unchanged at 176M/T.

For maize corn, alterations included an increase in global production (mainly emanating from Brazil), which could not be offset by a reduction in consumption. World maize corn ending stocks were therefore estimated 2M/T higher (than previously thought last month) at 118M/T.

For oilseeds – well, this is where it gets just a little confusing. The USDA estimates reduced their forecast for soybean production in Argentina by 1M/T (dry weather has reduced expectations for the crop in recent weeks), but increased their estimate for Brazil by 1M/T (it would seem that the recent wet weather there has in reality done little to hamper harvest progress).

Furthermore, since the release of the estimates, harvest progress has continued at a ‘fine rate’ (according to agrimonry.com) and ‘adequate although perhaps not plentiful’ rains have since fallen in Argentina. Not exactly the best news for those of you who were reluctant to trade OSR at the highs of £390/T ex-farm we saw last week.

Consequently, values have retreated back to the £380-4/T ex-farm mark for spot collection, with little price carry available for movement further forward. The current strength of the Euro (£1 = 1.18EUR) is also doing little to help export opportunities.

However, it is important to remember that £380/T ex-farm with bonuses still put’s values at £400+/T, particularly given the current volatile nature of the oilseeds markets.

To view this month’s WASDE from the USDA in full PDF format, please see the link below:

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