Week Beginning Monday 24th September 2018

The value of sterling against the value of the euro climbed last this week to an 8-week high of £1 = €1.1262. The rise comes on the back of both further Brexit negotiations and positive inflation statistics for the UK.

AHDB have added that “stronger sterling often puts pressure on UK prices, or can limit the extent that any grains in wider European prices are reflected here. In contrast, a drop in the value of sterling is usually supportive to UK prices. The direction of sterling against the euro will be important to monitor over the coming weeks and months as the Brexit talks continue. For example, if the value of Paris wheat were to rise, we may see those gains reflected to a lesser extent in the value of UK wheat”.

 

Although the LIFFE wheat futures firmed last week, ex-farm values are only marginally improved. Market sentiment has continued to shift, and buyer interest is limited. Farmer “interest” has also waned this morning as the majority of growers commence their autumn drilling campaign. The arrival of some much-needed rainfall last week has certainly benefitted conditions.

Various shipments of imported wheat are now believed to “backed up the Humber” due to Vivergo’s closure on Friday. This will probably be displaced within the trade over the coming months,

Feed wheat for spot collection is today valued in the region of £172.00/T – £173.00/T ex-farm. Looking ahead, a small premium is offered for movement into the New Year, but again, buyer demand is limited.

Milling premiums are generally unchanged – group 1 wheats are currently trading in the region of £190.00/T ex-farm whilst both hard and soft milling varieties are achieving a £5.00/T – £7.00/T premium over the feed wheat base. We are struggling to trade low specification group 1 varieties alongside full specification group 2 varieties, purely due to the volume of grain of this grade.

Feed barley is valued at a £5.00/T discount to wheat, but large tonnages are being secured for more, particularly to customers who are flexible on storage options.

 

There was an interesting article on AHDB’s website last week explaining the potential impact of a winter El Nino.

According to the latest Oscillation indicator (courtesy of the US government), there is a 65% – 70% chance of a weak El Nino weather even occurring this winter. An El Nino can affect different regions in different ways. “One of the biggest impacts of a winter El Nino is on palm oil production in Malaysia and Indonesia. During an El Nino, the region, which will then be at peak production, suffers from warmer, drier weather”.

We last saw a significant El Nino in 2015-2016; production of palm oil was sharply impacted, and output fell by 11% in Malaysia from the year previous and 3% in Indonesia.

It will be worth monitoring this over the coming weeks – if palm oil supplies begin to tighten (or even stock estimates begin to tighten), we could see prices firm across the oilseed complex.

 

 


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