£110.00/T – A Selling Opportunity?

Having been convinced that UK feed wheat values would have retreated to £100/T ex-farm by now, it was rather surprising to see that values have actually increased by several pounds per tonne this week.

Even though values further south in Norfolk, Suffolk, Dorset and others traded sub £100.00/T ex-farm last week, values in our part of the country were kept buoyant given the relatively local demand from both bio-ethanol plants and our local feed mills.

Spot collection feed wheat is currently trading in the region of £110.00-112.00/T ex-farm whilst movement further forward offers very little price increment.

Physical supply and demand doesn’t appear to be any different; Europe are still marketing a record wheat crop, grain production over in Russia has now topped 100M/T with still 15% of the crop left to cut and this year’s US maize corn harvest is now well underway with apparently ‘excellent’ results.

Currency fluctuations are therefore the main culprit, the majority of which should be attributed to political influence and economic pressures elsewhere. 1EUR is currently the equivalent of around $1.25; 6 months ago 1EUR was the equivalent of $1.40.

Consequently, European wheat (including UK wheat prices in sterling) is a more competitively priced option for potentially global importers, hence the slight improvement to local ex-farm values.

But should £110/T+ ex-farm be considered as a selling opportunity, or has the grain market finally bottomed?

Friday’s all important World Agricultural Supply and Demand Estimates (WASDE), courtesy of the US Department of Agriculture (USDA) will hopefully answer this one. Yields for this year’s maize corn harvest (which is now 30% complete) are yet to be confirmed and the last thing this volatile market needs is any record breaking surprises.

Elsewhere, Australia usually contributes more than 20.0M/T to global wheat supplies and the combines haven’t even started to roll there yet. On the one hand a warm, dry summer could have capped yield potential; on the other an ideal autumn earlier this year undeniably gave the crop an excellent head-start.

A similar picture is also painted for South America and we are yet to see the outcome of their grain harvests. Brazil alone accounts for more than 80.0M/T worth of maize corn and progress here will be one of the main underpinning market fundamentals as we enter 2015.

I stand by my initial judgement that ex-farm values could well be trading in the region of £100/T ex-farm before the end of the year. Politics and economics may add a little life to values in the meantime, but there is no denying that the UK is struggling to compete in one of the most over-supplied and competitively priced grain markets for several years.

£110.00/T; most probably a selling opportunity and definitely easier said than done!

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