Week Beginning 23rd January 2016

It has been an extremely volatile fortnight for the old crop grain market as the value of the pound continues to fluctuate against other major currencies. Feed wheat for spot collection has valued anywhere from £140.00/T – £150.00/T ex-farm over the last couple of weeks and is currently trading in the region of £148.00/T – £150.00/T ex-farm.

Since June, most ‘Brexit Based’ discussions have had a negative impact on the value of sterling as the continued uncertainty adds pressure to the currency. However, last week’s announcement by the government that a ‘Full Brexit’ and an exit from the Single Market would be their way forward provided a much needed boost to the value of the pound. Although the market remains nervous, it appears to have been reassured by the outlining of the governments priorities as we move forward.

Since the old crop feed wheat market has moved upwards so quickly, milling wheat premiums have become squeezed as the millers struggle to play catch up. Whilst premiums for Group 1 varieties at full specification achieved a £7.00/T – £8.00/T premium before Christmas. Today, a £4.00/T – £5.00/T premium looks generous.

Also, with Vivergo due back online next month (apparently), Yorkshire is once again positioned in a unique situation as buyers seek to make short term cover for the re-opening. This puts local ex-farm values at a premium compared to other areas of the UK for feed wheat which adds further pressure to local milling wheat premiums – they appear even smaller as the feed wheat base is higher than it should be.

As for the new crop grain market, things have been slightly less volatile although there has still been plenty of movement to keep track of. Feed wheat for harvest collection is currently trading in the region of £135.00/T ex-farm whilst movement before the end of the year should make £140.00/T ex-farm.

Meanwhile, the upward trend evident in the old crop OSR market appears to have stalled this week as values remain in the region of £360.00/T ex-farm for spot collection.

The old crop market appears to be lacking in direction at the moment; on the one hand we are seeing weather issues across Argentina and the generally weak pound remain supportive, yet on the other hand the USDA figures are undeniably bearish for South American oilseed production generally, grounding any weather based rumours.

Given the recent removal of export taxes on both maize corn and winter wheat in Argentina, we already know that the amount of soybeans in the ground for the current trading season is lower than initial expectations. However, according to the latest WASDE from the USDA, this season’s Argentinean soybean crop is forecast at 57 million tonnes – this is a slight increase on the 56.8 million tonnes produced last season but a 4 million tonne decrease on production in the season before that (2014-2015).

Regardless, concerns are ongoing this week for the condition of this season’s crop, particularly in key growing areas south of the country. According to local weather forecasts, dry conditions are predicted for the next couple of weeks and while the planting window for soybeans in Argentina runs from October to January, it is expected that these dry conditions (if realised) will be too late to permit any replanting of the lost soybean area which occurred earlier in the season due to dry conditions.

It should also be reminded that Brazil is on track for a record harvest of 104 million tonnes this season which should outweigh any losses in production from Argentina.