Week Beginning 13th December 2016

The London LIFFE wheat future for January 2017 closed at £134.90/T on Friday evening (9^th) December, £2.05/T lower than the week previous. In opening trade this morning, the future remains unchanged.

Although the trading screen has edged lower over the last week or so, physical ex-farm values are unchanged. Some farm-sellers appear to be looking for that “Christmas Bonus” which we often see being offered at this time of year – that extra couple of pound per tonne as both end-users and buyers alike panic buy to ensure that positions are well covered. This year, the premium is there, it just isn’t as obvious – the markets have drifted a couple of pounds per tonne lower but the ex-farm bids are unchanged.

Feed wheat for spot collection this week and next are offered in the region of £137.00/T – £138.00/T ex-farm. Further forward, buyer interest continues to be limited and ex-farm bids into the early summer months are only offering a couple of pounds per tonne. £140.00/T ex-farm currently looks like a realistic value for May/June collection.

The latest World Agricultural Supply and Demand Estimates (WASDE), courtesy of the US Department of Agriculture (USDA) were released on Friday evening. The latest instalment left the outlook for US balances of wheat, maize and soybeans unchanged from the previous estimates given in November. Unsurprisingly, both global wheat and maize corn ending stocks climbed higher once again.

To view the report in full, please see:

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

The first official 2016/17 UK cereals balance sheets for wheat, barley, maize and oats were published last week by DEFRA – to see the report in full please see:

https://cereals.ahdb.org.uk/media/1157639/011216-Dec-Balance-sheet-1617.pdf

A few points worth noting are:

• Lower availability and higher consumption has led to a tightening of the wheat balance sheet this season. Total wheat availability is forecast at 18.9 million tonnes – this is 7% less than the 2015/2016 balance sheet due to a smaller crop produced this year. a more finally balanced wheat picture makes a refreshing change following two previous years of significant stocks accumulation.
• The surplus of barley for export or free stocks is a third lower than last season, with lower output but stable demand. Total availability of barley in 2016/2017 is forecast 10% lower year on year at 8.15 million tonnes.
• Lower opening stocks but slightly higher forecast demand increases the requirement for maize imports this season.
• Another strong production season is expected for oat millers in 2016/2017. Rainfall throughout September was above average in the major growing regions and although this was initially a concern (hence the initial forecasts), it actually created good soil moisture during a critical development period despite the delays to harvesting.
• But what does this mean for the global market? The HGCA have reminded that for the past ten years, Australia has on average exported around 70% of its wheat production. If a similar trend continues for 2016/17, this will mean that a large Australian wheat crop is likely to add pressure to an already globally saturated wheat market. This will require some attention as we head into the New Year.
• Elsewhere, according to a government crop report, wheat production in Australia is forecast at a record high of 32.6 million tonnes this season. This is a 35% increase year on year and is a 16% increase from the previous forecast given in September. A record barley crop is also forecast at 10.6 million tonnes, a 24% increase on last season.
• AHDB have added that in light of the tighter situation with regards to wheat supply and demand this season, it is going to be an interesting year ahead in terms of trade flows. “Going forward, if the area planted to wheat remains similar to that for harvest 2016, yield growth will need to be much higher than we have witnessed to date to keep production in line with the advancement in demand”.