By Doug Niven

Following two relatively dry rainfall months, March has already produced around 70mm, or three inches of rain and the first meaningful fall of snow in the Borders.

The white stuff did not last for long before more rain got rid of it and we have seen surface water lying in some fields, but this has also now gone.

However, it has held up any further thoughts of spring sowing – but gusty winds that have been a regular feature, coupled with the spring equinox and a better weather forecast for this coming week, the fields will soon dry out to allow work to progress.

To mid-week, England had somewhere between 50-90% of its spring barley sown and Scotland has about 25% in the ground. In Europe, France has completed its sowing, Germany is around 40% complete and Scandinavia is no more than 10-15% sown, so some way to go but still plenty of time to get the job done.

The UK was due to leave the EU next week, but we could still be no further forward when B-Day, March 29, arrives. However, in preparation for a no-deal Brexit, the UK government has released its proposed tariff schedule for UK imports.

The main headline for our cereals sector is that there will be zero tariffs and no Tariff Rate Quota (TRQ) system, although imports of palm oil and coconut oil will face tariffs.

In simple terms, this means the UK market will be open to all global exporters after previously having protection from EU tariffs and TRQ trade barriers. Domestic importers would face no extra costs importing from any origin worldwide for wheat, barley, maize and some oilseeds.

As part of the EU, growers are partially protected from global markets by the TRQ system, which allows a specified volume of grain into the EU at a preferential tariff of €12 per tonne and anything outside this TRQ allowance would face the set tariff of between €89 and €95, depending on product.

The risk for UK growers is that alternative, cheaper, grain imports would be freely available to import into the UK. Therefore, in a no-deal scenario, the domestic price of grains specifically would have to move lower in order to compete against cheaper imports.

This probably means that the milling wheat sector is likely to face more challenges than the malting barley industry if a no trade deal is negotiated. The UK, is typically, a nett importer of milling wheat, while any surplus in feed is exported.

However, tighter domestic supplies of wheat, along with increasing global competition, have created a challenge for UK wheat exports in recent years. For instance, since 2013-14, the UK has been a nett exporter of wheat in only two seasons, 2014-15 and 2015-16.

Analysis of total UK wheat production and consumption since the early 1990s shows that the trend in UK wheat demand overtook the trend in UK wheat output in 2016. Subsequently, it is likely that the UK will maintain nett importer status for wheat, at least in the near term.

Last week, world wheat markets continued their downward trend and the US’ Chicago Board of Trade wheat futures hit contract lows, pulling EU and UK wheat futures lower too. This was due to slow US exports and an expected rise in wheat production for many of the world’s major wheat producers this coming harvest.

However, later in the week, due to flooding and high winds in the US, this saw a change of direction and the Chicago futures rose by 6% for their strongest rally since last summer.

In the UK, we have also had a volatile situation with the ongoing Brexit debacle unsettling sterling exchange rates. However, global markets have picked up and on the back of the rise of US wheat futures, UK futures rose as well, although the rise was capped by a strengthened sterling.

May, 2019, old crop Liffe feed wheat futures rose last week by £3 per tonne to £162.55 and new crop November, 2019, futures also picked up by £2.35 to £148.35.

UK ex-farm prices last week were down as bread milling wheat fell by £6.40 to £174.80, feed wheat was down £1.10 to £159.90 and feed barley was back £5.00 to £131.20 which is a price discount to feed wheat of £28.70 per tonne.

Earlier this week, global wheat prices eased again as forecasts of larger production figures were released such as Germany, which expects an increase in wheat production by 19.4% year-on-year due to a larger planted area, coupled with a milder winter and a crop growing in ideal conditions.

There is also an abundance of US end of season wheat stocks and the new crop market continues to look well supplied. With the large volume of US wheat left to commit to export and historically high-end stocks, US wheat will have to remain export competitive.

Its total committed tonnage is 3% behind last year and there is still an additional 3.42m tonnes of US export sales needed by the end of the season – this is the largest volume of wheat left to commit to export at this point in the season in the last five years.

EU wheat exports have become more competitive and have captured an increasing volume of trade. At the turn of the year, EU wheat exports were running 27% behind last season’s pace but that gap has now narrowed to just 11%.

The EU Commission forecasts its 2019-20 common wheat production at 140.8m tonnes, compared to 128.7m tonnes last year, so EU exports are predicted to rise to 25.5m tonnes next year, compared to 18, tonnes this year.

Attempts by merchants to sell any remaining supplies of 2018 old crop barley, has proved difficult and this has resulted in ex-farm feed wheat and barley prices being £30 per tonne apart, though the barley discount to wheat in Scotland is closer to £20 per tonne. Also, with old crop barley at an £8-£10 premium over harvest values, this means a further downside on prices is unlikely in the short term.

Old crop barley demand is being limited in the animal feed sector by the mild and early spring, coupled with high maize usage and the necessity of wheat in the feed ration to get the feed spec’s right.

However, high maize usage could add further pressure to domestic barley prices as maize imports in January were the highest ever monthly UK maize tonnage recorded. Total maize imports for the 2018-19 season so far at 1.681m tonnes is almost 0.5m tonnes higher than at the same point in 2017-18.

There has been little change in UK physical oilseed rape prices this past week considering the volatility around sterling and all that has been going on with Brexit in recent weeks and months. Bubbling away in the background, there is also the ongoing US/China trade dispute that appears to be getting closer to a positive result. And a Chinese dispute with Canada and resultant restrictions on Canadian canola (OSR) imports is depressing EU rapeseed prices as Canada seeks to offload 1m tonnes of canola, likely to the EU.

The oilseed rape price delivered Erith was unchanged last week at £310 and for harvest and November delivered Erith was quoted at £304.50 per tonne and £312.50 per tonne, respectively, so not much change is expected.

EU winter oilseed rape plantings are down on last year and the ongoing dry weather in southern and eastern regions of Europe is causing problems as well as in the Ukraine, which is an important supplier to the EU, especially as their winter planted area has tripled since 2016.

Drought conditions are also very much in evidence in Australia, which is also an important EU oilseeds provider. The trade, however, appeared to be relaxed about sufficient supplies for 2019-20, especially as Canada’s canola stocks are at a record level, up 4.9% on the year, which is keeping a lid on prices.

Imports of soya into the EU to date are up 11% on the same period in 2017-18 and so far this season 77% of EU soya have come from the US as its crop remained competitive due to prices dropping following the ongoing tension between the US and China.