Volaitlity Continues into 2015

Welcome back and a Happy New Year to all of our readers.

 

On Wednesday 31st December 2014, the London LIFFE wheat future for January 2015 closed for the year at £133.30/T – around £30.00/T lower than the final close of 2013 but around £30.00/T higher than the values during the 2014 harvest.

In opening trade this morning, the May wheat future has opened £2.25/T higher at £138.25/T. Early bids in this morning are predictably slow to arrive as the trade begins to negotiate values. Current values are certainly struggling to make the £140.00/T ex-farm that was initially offered for January collection pre-Christmas this morning – £136.00-138.00/T ex-farm currently looks like a more realistic offer.

The volatility we saw in ex-farm grain values in the run up to Christmas appears to have continued – the London LIFFE wheat future for May 15 for example was trading £5.00/T higher over lunch today but has since retreated. This could be one to watch as the week progresses – particularly for those of you who are looking to take opportunity of a price rally for some spot movement.

Feed barley for spot collection is also proving difficult to value this morning although bids further afield would suggest a value somewhere in the region of £120.00/T ex-farm.

 

As for new crop values, the London LIFFE wheat future for November 2015 has opened £2.40/T higher this morning at £143.00/T. Again ex-farm values are difficult to pinpoint at this stage – £135.00/T currently looks like a realistic offer for as available collection off the combine at harvest.

 

As we start the New Year we are beginning to see some more formal estimates emerge for the acreages planted / to be planted for this year’s harvest (2015).

According to the HGCA (please see their website for more), the EU sowing campaign for winter cereals and OSR for next year’s harvest is just about complete. They add that whilst weather was not a major issue regarding sowing decisions this year (high temperatures and moist conditions have been generally favourable), “newly policy constraints” (the ‘greening’ requirements and the temporary ban of neonicotinoids) have required some careful consideration – “we should therefore expect to see some changes to crop rotations this year”.

 

Early forecasts have indicated a similar area will be dedicated to cereal production for the 2015 harvest at 57.45 million hectares – just 0.23% lower than the 2014 harvest to be specific. The OSR area for the 2015 harvest is also slightly lower at 11.80 million hectares – 1.42% lower than the 2014 harvest.

The area of fallowed land is however set to significantly increase, presumably due to the new crop diversification requirements for the Basic Payment Scheme (‘greening’). The proportion of fallow land and set aside will increase to 5.27 million hectares for harvest 2015 – a 5.14% increase on last year.

 

Further afield the US Department of Agriculture have deemed just 58% of next season’s winter wheat crop for the 2015 harvest to be in a ‘good’ condition, a significant decline on the quality of the crop when compared to this time last year. An early start to the winter appears to be predominantly responsible for the above but trade opinion is split on this – many are still convinced that crops may enter the spring period in a good position given the amount of snow cover in central areas,

 

The next set of World Agricultural Supply and Demand Estimates (WASDE) from the US Department of Agriculture (USDA) are due for release a week today, Monday 12th January. I expect this week will be fairly quiet ahead of the report’s release as the trade awaits for some key information – Will the USDA recognise the ‘potential Russian export restrictions’ that were rumoured of in December? How are the South American crops developing? Will there be any further alterations to Australian wheat production this season? Watch this space.

 

Meanwhile OSR values are unchanged on their pre-Christmas value of £255/T ex-farm for spot collection. Movement further forward is offering very little carry at the minute due to limited export opportunities at this stage.

 


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