Week Beginning Monday 4th January 2016

Prior to the Christmas break, the London LIFFE wheat future for January 2016 closed at £112.50/T on Friday 18th December following a week of limited price movement. In opening trade this morning, the future is valued slightly higher at £114.00/T.

Feed wheat for collection in February is this morning offered at £110.00/T ex-farm. Further forward, £115.00/T ex-farm currently looks like a realistic offer for May/June collection. As for feed barley, values are struggling to make that £100.00/T ex-farm benchmark for spot collection due to a severe lack of buyer interest.


As for new crop values, the London LIFFE wheat future for November 2016 is this morning valued marginally lower at £125.75/T. Feed wheat for as available collection off the combine at harvest therefore equates to £115.00/T ex-farm.


The unseasonably mild (perhaps even warm) weather over the festive season throughout the Northern Hemisphere has led to a lack of snow covering across winter crops. Currently, winter crops are generally said to be in a good condition despite the odd flood warning and if temperatures remain mild, snow cover will not be a necessity. However, a sudden drop in temperature could cause several issues, particularly given how advanced some crops across central/southern Europe are. By the end of December last year, the majority of Europe through to Russia had an adequate amount of snow – this year, almost all of Europe’s crop areas and even some Black Sea regions are without any snowfall at all.

Elsewhere, storms across parts of the US Midwest have, according to agrimoney.com caused widespread flooding over the New Year and have consequently raised concerns for both the physical transportation of old crop wheat and the condition of developing new crop wheat.


Over in the Southern Hemisphere, Argentina’s newly appointed government have last week confirmed that alongside the reductions to grain export taxes, there will now be no limit to the amount of wheat and maize which can be exported from the country. According to AHDB, “the move will add further competition to the worlds grain export market and the USDA have subsequently increased their forecast for Argentina’s wheat exports by 1 million tonnes to 6 million tonnes for the current trading season”.


The quotas (restrictions to the amount of wheat and maize which can be exported each season) were previously implemented by the former president as a means to ‘ensure domestic food needs’ and a result of this, Argentine farmers shifted from predominantly producing wheat and maize in favour of soybeans – which weren’t subject to quotas.


But will we see a change to planted areas? Market opinion appears to be split on this. For some, the 35% reduction in export tax on soybeans will be a big enough incentive to proceed with crop rotations as normal. For others, the removal of quotas on both wheat and maize corn gives the farmer more opportunity with marketing and is therefore a more attractive option.


The changes are already having an impact on the global grain trade and in the last few days we have seen Argentina ‘dominate the recent buying tender from Egypt’ despite healthy competition from Russia, Ukraine and France.

Argentina secured 120,000/T worth of wheat trade and the ex-dock price was clearly the deciding factor in the trade. According to AHDB, the Argentine quotes involved freight costs of around 15 dollars per tonne– this is comparatively expensive given that the French quote included freight costs of just 9 dollars per tonne. Russia’s quote was lower still with included freight cost of 8 dollars per tonne.

“These comparable freight costs demonstrate just how cheap it is to move grain around the world right now – illustrating that is not a case of sea transport or proximity being the defining element of competiveness, it is more about currency”.


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