Week Beginning 21st March 2016

The London LIFFE wheat future for March 2016 closed at £100.90/T on Friday evening (18th March) – £0.40/T lower than the week previous. As the future is due to expire anytime now, it is now important to consider the London LIFFE wheat future for May 2016 – this closed at £103.10/T on Friday evening.

Despite the movement on the screen, physical ex-farm values for old crop feed wheat were generally unchanged last week. In opening trade this morning, all old crop wheat futures are unchanged. Feed wheat for April collection is offered at £100.00/T – £101.00/T ex-farm.

As for new crop values, the London LIFFE wheat future for November 2016 closed at £117.10/T on Friday evening (18^th March). The future endured plenty of movement throughout the course of last week with values fluctuating anywhere between £116.00/T – £118.30/T – the equivalent of £109.00/T – £111.00/T ex-farm for September collection.

In opening trade this morning, the future is also unchanged. Feed wheat for as available collection off the combine at harvest is this morning valued in the region of £107.00/T – £108.00/T ex-farm. September collection offers slightly more at £110.00/T ex-farm.

For those of you looking to secure movement at the benchmark £120.00/T ex-farm, May 2017 collection currently looks like a realistic offer.

According to the latest figure’s given by HMR&C which are now available to view in full via AHDB, UK wheat exports in January reached the highest monthly level since December 2011 at 310,000/T. This brings season to date wheat exports up to 1.3 million tonnes – this is 21% ahead of the pace achieved at the same point last season.

The HGCA added that “the boost in UK wheat exports is unlikely to come as a big surprise, as sterling has weakened against the euro since the start of the year, making UK wheat relatively more competitive in euro priced markets.

Take Spain for example, in January 2015 it imported 46,000/T of UK wheat. However, in January 2016 this amount almost quadrupled with shipments of the grain totalling 175,000/T”.

However, the increase in pace in January, ‘may have come a little too late’. To avoid increasing the wheat surplus any further from current estimates, the HGCA have estimated that the UK will have to export 350,000/T of wheat every month for the rest of the season (Feb-June). The last time that the UK achieved 5 months of consecutive exports of 350,000/T was in 2008.

Although this boost in export pace in January has helped to shift some of the UKs wheat stock, we still have got quite a way to go to avoid heavy stocks rolling into next season.

Russia have made a start on this year’s spring planting campaign with just over 1% of the intended area now drilled – the equivalent of around 650,000 hectares. A favourable forecast for the fortnight ahead should allow for good progress to continue.

Neighbouring Ukraine are well ahead with this year’s spring plantings – 421,000 hectares are now drilled, around 17% of the intended area. This is firmly ahead of the 8% that was drilled by this time last year. However, the Ukraine may need to replace around 15% of winter grains/oilseeds with a spring equivalent due to poor establishment but with such an early start to this year’s spring campaign, there should be plenty of time to do so.

Elsewhere, the German Farm Cooperatives Association estimated grain production there this year to be little changed from 2015 as crops begin to emerge from winter dormancy in a good condition – wheat production is forecast at 26.1 million tonnes (a 1.7% reduction on last year), barley production is forecast at 11.4 million tonnes (a 1.9% reduction on last year). The estimates are in line with other trade expectations at this stage.

OSR values experienced a volatile week over the last seven days – we have seen old crop values fluctuate anywhere between £253.00/T – £260.00/T ex-farm as the pound values anywhere from 1.2650 – 1.2850 against the Euro. The fluctuating currency also benefitted new crop values – £255.00/T ex-farm was offered at one stage for as available collection off the combine at harvest.

Speaking of currency, the Brazilian real has continued to strengthen against the dollar over the last week, making US exports look favourable compared to any new Brazilian Business.

United Oilseeds have reminded that “although crush margins look better on paper, product sales of both oil and meal are still difficult which is potentially reducing crush volumes. There is however a continued demand for UK exports and we are still seeing movement into the Baltic area – a weakening currency, if ‘Brexit’ fears persist, should help values as we move forward”.