Volatility Continues

It has once again been a rather volatile week for the grain markets with feed wheat for spot collection fluctuating anywhere between £112.00 – £117.00/T over the last seven days.

Both currency and wider economic variables appear to responsible for the above; which in other words means that influences which in fact have very little to do with physical supply and demand are currently underpinning the market (just to make it that bit easier to follow!).

Current values appear to be trading in the region of £115/T ex-farm for spot collection with movement further towards the end of the year offering a couple of pounds per tonne more. Additionally, buyers appear to be extending their cover into the New Year and movement for Jan/Feb is now approaching £120/T ex-farm.

DEFRA have this week released their second lot of provisional production figures for this year’s harvest, final figures will be available by 18^th December. Record yields are reported for both wheat and barley crops – at 8.6T/Hectare and 6.5T/Hectare respectively (a for more realistic figure than initially suggested and one that appears to be reflective of our region).

For wheat, the total area harvested is said to be 20% higher than last year; accompany this with a yield which is said to be 16% higher than last year and we are faced with a crop size of 16.60M/T – a 39% increase on last year.

For barley, total production is believed to be in the region of 7M/T. 3.1M/T of this is believed to be winter barley, a staggering 56% increase on last year’s crop. Spring barley therefore accounts for 3.9M/T of the above, a 23% decrease on last years crop.

Regardless of the above however, the latest HMR&C data for August 2014 has confirmed that the UK continued to be a net importer for the second month of the current 2014-2015 season.

228,000/T of wheat arrived into the UK in August with both France (78,000/T) and Germany (30,000/T) making significant contributions to the total. Opinion is divided regarding the quality of these wheat’s – does this suggest that they are importing quality milling wheat? Is the quality of the French wheat crop perhaps not as poor as we initially thought? Or are they merely importing European feed wheat as a cheaper alternative due to the recent currency fluctuations?

Personally, I would think it’s both of the above.

Consequently, you can understand my confusion regarding the recent rally to UK wheat values, particularly when you consider the ‘provisional domestic consumption’ figures that were released alongside the ‘provisional production figures’ by DEFRA this week.

Alongside Wheat Production, forecast at 16.6M/T as mentioned, imports are projected at 1.3M/T and opening stocks were 1.96M/T – giving a total availability of 19.86M/T.

For Domestic Consumption, Human and Industrial use is forecast at 7.93M/T, Animal Feed usage at 6.72M/T and ending stocks of 1.5M/T – this gives a total consumption figure of 16.15M/T.

This leaves a staggering 3.71M/T surplus currently with no home or market!