As we enter December and the oncoming festive season, at this time of the year markets tend to go quiet and last week the Liffe feed wheat futures saw little movement.
The May, 2017, contract ended up only 80p higher at £ 141.30 and November, 2017, new crop futures were down £1 to £134.95 – the lowest level since early October.
Ex-farm bread milling wheat was up £1.80 to £140.40 and feed wheat was up £1.50 to £135.30. Feed barley was 30p higher at £114.80 and oilseed rape, delivered Erith, was unchanged at £355.
Sterling continues to be the key driver in the wheat market and when it strengthens, it shuts off any export prospects. Relatively weak sterling since Brexit has helped UK values, but now that the pound is stronger and equates to around €1.18, this makes UK wheat less competitive.
That said, UK exports are expected to hit the 1m tonne mark around the turn of the year but with the US closed for Thanksgiving last week, the weekly traded volume in UK May, 2017, wheat futures was the lowest in two months.
However, there is fairly strong domestic demand for feed and soft wheat, but bread wheat premiums continue to fall as there are too few buyers for the surplus tonnage of good quality wheat around.
The wheat harvest in the Southern Hemisphere is underway and early reports are showing high yields. The Australian wheat harvest is reportedly producing a five-year high of 28.3m tonnes, up 4.1m tonnes on last year.
The International Grains Council has raised its estimate for 2017 world wheat production to an even higher record of 749m tonnes, which would be 12 million tonnes higher than last year and the estimate for world maize production has been lifted by 7m tonnes to 1.042bn tonnes – a gain of 71m tonnes year-on-year.
The forecast for combined world stocks of coarse grains, such as barley, maize, sorghum and wheat, at the end of 2016-17 was raised by 7m tonnes to 504m tonnes, taking the total above 500m tonnes for the first time.
So it looks like the world is awash with grains, but EU wheat exports are still 9% ahead of the same point last year, totalling 9.4m tonnes compared to 8.6m tonnes, but the availability of EU wheat for export is 24% down on last year due to a cut in production especially in France because of all the adverse weather earlier in the year.
That means the EU countries have shipped 38% of the current full season forecast, which last year was just 26% of its estimated full season exports.
UK barley exports are continuing and with domestic interest from maltsters continuing this is keeping up prices and also brewing premiums. As forward export sales look good, it looks like premiums will remain for the foreseeable future.
The Environmental Protection Agency increased US biofuel usage targets for 2017 last week and could mean an increase in demand for vegetable oils to be used in biodiesel production, in particular soya oil which could potentially reduce soya oil stocks and will also help UK rapeseed values as well.
The target for US biofuel use, which is mainly maize-based ethanol, is up by 0.5bn gallons to 15bn gallons. The US is forecast to use 134.6m tonnes of maize to produce ethanol in 2016-17, which would be the highest level ever recorded. This could potentially increase again and eat into the currently heavy US grain stock picture.
In September, the UK imported a total of 14,300 tonnes of rapeseed and only exported 2000 tonnes. This made the UK a nett importer of rapeseed in the first month of post-harvest trade, with the largest monthly nett imports since December, 2013.
This shift to the UK may come as no surprise, considering the tight supply situation at present this season. In October, it was thought that the UK would be increasing its imports for this season as unusually we would rapeseed deficit for the first time in four years.
The bean market is still dominated by lack of human consumption export demand. This has reduced the human consumption premium over feed beans to £5-10 per tonne.
Only better quality beans are being sold for human consumption as any quality deductions will eradicate any premium price available. Continued good demand for feed beans, though, has kept this market well supported and shows no sign of weakening.
The GB potato production for 2016 is estimated down by 5% from 2015 to 5.22m tonnes and average yield is estimated at just under 45t/ha, which is down 8% on last year. The planted area for 2016 is put at just over 116,000 ha, or 4% up on last year.
This year’s crop is the fourth smallest potato crop on records going back to 1960 and, with reports of wastage, particularly to growth cracks and greening, this has combined with lower gross yields to produce a smaller crop.
Scottish yields are down less year-on-year compared to English yields and this season’s drop in production comes following on from last year’s already low level, when tightness in supplies became evident later in the season. This indicates that supply this season could be even tighter.