THE MARKETS have experienced a quiet week in terms of currency, politics and weather, though the UK old crop market did fall slightly and the domestic new crop market showed small increases on the week.
On a global front, US grain markets closed up on the week, driven by a combination of factors including strong bioethanol demand for maize, while EU maize stocks for the end of the season were estimated at their lowest for nine years.
At 9.9 million tonnes, the maize stocks latest estimate is below the levels recorded in 2012-13 and is the result of two consecutive years with below average output, at 60m tonnes, against strong demand. Last month, maize stocks were expected to be the lowest since 2013-14, following a cut to the latest figure of 6m tonnes against previous forecasts.
This has been mainly caused by increases to the amount of maize used for bioethanol in all years since 2011. Tighter supplies of this key feed grain across the EU as a whole is also adding support to EU wheat prices as both commodities need to limit demand and prevent stocks sinking further.
In the UK and particularly in the South of Scotland, a lot of wheat is being used to produce bioethanol at the Ensus plant in the North of England, which is keeping localised prices higher than the average.
EU soft wheat exports now stand at 14.7m tonnes for the year to date compared to 15.7m tonnes last year at this time, which implies that almost 66% of the 2016-17 wheat surplus has now been exported.
However, EU maize imports stand at just 6.3m tonnes, compared to 8.2m tonnes last year at this time which points to more home-grown cereals going in to animal feed.
The influential US Chicago Board of Trade's wheat market rallied to a three-month high last week as export sales for the season were higher than expectations at 22.89m tonnes. This is 37% up on sales made at this time last year, but it is important to note the USDA total target is 26.5m tonnes, compared to last year’s 21m tonnes
Liffe feed wheat futures for May, 2017, old crop were down £1 to £1438.05 and for November, 2017, new crop was down 70p to £136.70 and for November, 2018, up 70p to £ 140.85.
Bread milling wheat ex farm was up £1.20 to £151, feed wheat was down 40p to £145 and feed barley was down £1 to £121.
There have been mixed reports of damage caused by a recent cold spell across the Black Sea arable areas, with reports of up to 750,000 ha of winter cereals affected. The concern is that a renewed cold followed a mild spell which encouraged snow melt, thus leaving crops more vulnerable to frost without a snow blanket.
In warmer climes, India looks likely to produce a record wheat crop this coming season, with reports of an increased area and favourable weather indicating their output might be more than 99m tonnes. After China, it is the world’s second highest wheat producing country and its previous record crop, in 2014, was 95.85m tonnes.
Canada’s latest wheat stock estimates show stocks of 25m tonnes, which is almost 1m tonnes ahead of trade expectations. Year-on-year this equates to an increase of 16.8% and emphasised further a global wheat surplus.
This is of particular interest to the global market as Canada is one of the top wheat exporters in the world and wheat production forecast for 2017-18 is put at 29.1m tonnes, or a drop of 2.6m tonnes year-on-year – but still the fourth biggest tonnage in 20 years.
Nearer home, old crop barley supplies remain tight as interest from compounders and merchants keep feed barley prices firm. The discount to wheat has narrowed a little to just over £20 and higher where there are ethanol plants in the North of England.
Barley exports have slowed, but for malting barley, exporters have been busy. Maltsters in the EU have not been buying poor quality French supplies so have come to Denmark and UK for their requirements.
Malting barley prices for next year’s harvest may come under threat as a larger crop of spring malting barley is forecast in England. If the French and the Danes plant their usual and expected acreage, then there could be a reasonable surplus in the EU.
There will be little chance to export this to the rest of the world as Australian barley exports are likely to reach their highest level on record this season thanks to a bumper harvest and good malting quality as well.
Barley production from Australia is now forecast at around 11m tonnes, of which 7.4m tonnes will be exported – that's 37% or 2m tonnes more year-on-year. Typically, two thirds of the barley produced in Australia is exported, with half of this being feed barley, one third malting barley and the rest as malt.
It is one of the world’s largest exporters of barley, usually accounting for around 30% of malting barley trade and around 20% of global feed barley trade and the increased competitiveness of the Australian crop could pose a risk to the UK barley market.