Week Beginning Monday 11th February 2018

THIS MORNING’S LONDON LIFFE WHEAT FUTURES:

• MARCH 2019 – £170.10/T (£0.25 HIGHER ON THE WEEK)
• MAY 2019 – £171.80/T (DOWN £0.20/T ON THE WEEK)
• NOVEMBER 2019 – £153.10/T (DOWN £0.90/T ON THE WEEK)
• MAY 2020 – £157.95/T (DOWN £2.65/T ON THE WEEK)

POUND Vs EURO –

THIS MORNING – 1.1411

MONDAY 4^TH FEB – 1.1415

MONDAY 28^TH JAN – 1.1577

The grain market remained subdued last week ahead of a key information release on Friday (8^th Feb). In the meantime, a lack of both news and weather changes to inspire markets to move in either direction has encouraged the market to drift lower.

Due to the “lapse in federal funding”, there was no monthly update from the USDA in the form of the WASDE. February’s report was however released on Friday afternoon (8^th Feb) and a few key points for the current trading season (2018/2019) are listed below:

WHEAT

• Global production is increased by 1.3M/T on December’s figure to 734.75M/T.
• There were no changes to Australian wheat production – forecast at 17M/T, but wheat exports were slightly reduced by 0.5 M/T to just 1M/T.
• Russian wheat production is increased by 1.6M/T to 71.6M/T. Exports are increased by 0.5M/T.
• There are no changes to EU production, import or export figures.

MAIZE CORN

• Global production is generally unchanged, but global ending stocks are slightly increased to 309.78M/T from 308.8M/T.
• US production is reduced to 366.3M/T from 371.52M/T.
• Brazilian production and exports are unchanged.
• Argentinian production is increased to 46M/T from 42.5 M/T. Exports are increased by 1M/T to 29M/T.
• There are no changes to EU imports.

SOYBEANS

• Production for Brazil is lowered 5M/T due to the ongoing dryness in parts of the South and Centre-West regions. Exports are reduced by 1.5M/T.
• Production for Argentina is lowered 0.5M/T to 55M/T due to a reduction in harvested area which is partly offset by an increase in yield.
• Chinese soybean imports are reduced by 2M/T to 88M/T.

Information regarding winter wheat and canola seedings for the US, courtesy of the USDA, was also released on Friday (8^th February). This confirmed that:

“The planted area for harvest 2019 is estimated at 31.3 million acres, down 4% from 2018 and down 4% from 2017. This represents the second lowest US average on record. Seedings, which began in early September, fell behind the five-year average seeding pace in early October and remained behind the five-year average seeding pace for the duration of the planting season. Seeding was mostly complete by the 11^th November”.

Although both reports were highly anticipated, trade reaction to the information has been minimal. With the reports being delayed, the trade appears to have drawn information from other sources into their assumptions and the reports on Friday didn’t reveal anything too different. If anything, the new crop market is marginally firmer, and end-user demand is much better this morning now that the numbers are out of the way.

Feed wheat for spot collection continues to be offered at £170.00/T ex-farm, with £175.00/T ex-farm offered for July collection. As for feed barley, a significant lack of end-user demand coupled with plentiful supplies held in commercial stores has added significant pressure to ex-farm values over the past few weeks. £155.00/T ex-farm for March collection currently looks like a big price.

As for the new crop, £147.00/T ex-farm is offered for harvest collection. Again, almost £30.00/T separates the old and new crop feed wheat values at the moment – a gap which will have to narrow at some point over the coming months. With supply and demand being nicely balanced in the short term, logic would suggest that the old crop should get cheaper before the new crop gets more expensive, particularly when you consider how well winter wheat crops look throughout the Northern Hemisphere.

According to AHDB, the amount of cereals used in GB animal feed production reached a record high in the first six months of the current 2018/2019 trading season. Total cereal usage between July and December last year was 3.3 million tonnes, an almost 90,000 tonne increase from the same period last year.

They added that “a key reason for this rise is the increasing use of maize in GB animal feed production”. Looking specifically at maize corn, 282,600 tonnes was used between July and December 2018. During the same period the year previous, 112,100 tonnes of maize was used.

A key reason for this rise has been the price competitiveness of imported maize over domestic wheat and barley in recent months. Locally, the above numbers are no real surprise given the amount of imported maize at the docks in the North of England.

Domestic barley prices have fallen recently, with the average price reaching around £155.00/T ex-farm, a £15.00/T discount to feed wheat. According to AHDB, this puts domestic feed barley at a discount to any origin imported maize, which is currently valued at £160.00/T ex the dock. This could represent an opportunity for those who can physically switch to using more barley in the feed ration going forward.