COLD DAMP conditions prevail and cereals not yet sown are now getting past their optimum planting time.
In many areas, land has been prepared for potatoes but again soil and air temperatures are too low and soil moisture levels need to decrease to allow work to progress.
It is not easy to apply fertilisers either without making a mess of tramlines which will result in them lying full of water for the rest of the year. The same applies to sprays, although the cold weather seems to have put a check on disease levels – at least so far!
As is now the norm, weather and currency dominate the commodity markets and there are plenty of issues around at the moment. The pound weakened further against the euro last week and fell to its lowest level since June, 2014, with £1 equating to €1.23.
Weak sterling actually helped UK markets post gains, despite falls in global prices following weak export figures and speculators in the US caused Chicago maize contracts to set a new daily volume record last week of 118m tonnes.
The UK wheat market is one of many commodity and equity markets eagerly awaiting the outcome of June’s EU referendum, with a weather eye to any currency changes that might cause.
The currency volatility might have helped UK cereal exports but there was little export activity this past week as buyers wait for cheaper supplies. There have been strong UK exports for both wheat and, in particular, barley up to the end of February.
And domestic demand for wheat remains low, not helped by animal feed production in January having fallen by 1.5% for poultry, 8.1% for cattle, 6.5% for sheep and 2.5% for pigs. For February barley inclusion in animal feed increased by 13.4% compared to a year earlier and wheat usage in February decreased by 1.1% year-on-year.
Currently, UK ex-farm feed wheat is worth £102.40 compared to feed barley at £99.40 and oilseed rape delivered Erith is up £6.50 to £287.50. The London wheat futures market is trading at a £20.30 carry from May, 2016, to May, 2017, and from May, 2016, old crop to November, 2016, new crop the gap is £13.50 – both of these present a sensible hedge for forward physical sellers.
The November, 2016, LIFFE feed wheat futures were up 15p to £119.65, compared to November, 2017, at £127.55. For the season to date – which is from last July – barley exports have progressed at the strongest pace in 17 years, with 1.3m tonnes having been exported so far, or 23% higher than last year.
UK barley continues to find relatively strong demand from non-EU countries, with a quarter of all exports so far outside the EU, compared with only 12% for wheat. The strength of our barley exports has protected UK feed barley prices from the extent of the downward trend that’s been seen for international feed grain prices.
If exports keep up the current pace, we could be looking at lower end-season stocks than last year, despite the reduction in domestic consumption this season. A lot will depend on UK price competitiveness and export pace in the last four months up to harvest.
Further price changes will depend on volumes left on farm once ships stop coming and whether remaining supplies are too much for domestic demand to absorb.
With the European spring barley crop being sown and growing in ideal conditions, buyers are reluctant to price further cover for now. As a result, the market place is quiet at the moment.
China is to end its nine-year maize stockpiling programme at the end of the current season, which has seen stocks increase to 110m tonnes, which is more than 50% of the total global stocks.
This should allow prices to be set by market rates by doing away with its price support system for the grain and replace it with direct subsidies to growers. China is looking to reduce maize plantings by 3.3m ha by 2020 with the intention of encouraging more soyabean production.
Previously, China’s maize prices have been supported to 30%-50% higher than international markets.
When the policy change comes into place, domestic maize prices are likely to come into line with international markets.
As a result, it could mean a reduction in demand for imports of maize and other feed ingredients such as sorghum, barley and distillers dried grains.
Argentina is doing the opposite to China by increasing maize production by 24% from last year to 4.2m ha, decrease soyabean production by 2% and increase wheat by 27% to 4.8m ha. This includes the elimination of export taxes and limitations for maize and wheat, but not for soya which still has an export tax of 30%.
Energy markets are strengthening on the prospect of an up and coming meeting between OPEC and other oil producers, which aims to bring a commitment to stall production, after nearly two years of oversupply.
June Brent crude futures rose by an initial 5.4% and then another 2.4% to $42.96 a barrel, from a low of
around $38 per barrel.