Sterling drop leads to more UK exports

SCOTLAND escaped the worst of the recent storm last weekend, named Katie, so it was a busy Easter weekend on the land, catching up with jobs that were waiting to be done and had been held up by the recent months of wet weather.

Air temperatures are still not climbing yet and soil temperature is still low, so crops will not jump as quickly as one would like to see. And neither is the market place for cereals, which remains in the doldrums.
Liffe May feed wheat futures were up £1.90 last week to £105, due in part to the ongoing UK wheat exports which are trying to get rid of the 3m plus tonnes of wheat surplus. It is unlikely the required balance will be exported by the end of June and an increased carryover tonnage seems likely.
In the UK, the gap between feed wheat and feed barley prices has been decreasing this past month and was down to £3.50 per tonne, compared to March last year when the gap was close to £7 per tonne. Feed barley prices these last few months have been relatively steady and it’s the falling feed wheat price which is reducing the gap.
UK bread milling prices have weakened throughout this season and now close to the feed wheat price floor.
While all UK grain prices have been weak this season, the fall both from last season and throughout this season to date has been especially steep for bread milling wheat. The UK average ex-farm full-spec’ bread price in March dropped below premium malting barley and is close to being overtaken on price by milling oats also.
Barley exports continue throughout the UK and are likely to continue until at least the end of April. Spring barley sowing is now well under way in most parts and, following the reduction in winter-sown crops, it will be interesting to see of spring barley follows suit and farmers leave some ground to fallow, given ongoing poor prices and large stocks still in store.
Total wheat and barley yields across the EU-28 are forecast to fall by 5% and 3%, respectively, in 2016 and, despite a decrease from last year’s high levels, if realised the yields would still be higher than the five-year average. Total wheat yield in 2016 is predicted at 5.7t/ha and total barley at 4.87t/ha.
There are again two issues that will influence commodity prices going forward, with the first one being currency and predicting the direction of currency after the EU referendum in June, which will add to the uncertainty on old crop wheat values. For instance, oilseed rape was up £5 last week and the risk of Britain leaving the EU seems to benefit UK farmers as sterling weakens, further supporting UK OSR values and this volatility can be expected to continue as the referendum approaches.
The other issue that could influence prices is the weather and, at present, there are several global concerns out there to keep and eye on. The USDA crop report last week suggested wheat was at a vulnerable stage of development during the recent cold snap in the Southern Plains where temperatures got down to as low as -10C.
Wheat crops in the affected region were well advanced, which left them exposed to frost and reports said that some crops would not be able to recover from the frost damage. There are also further concerns for the region where emerging drought may be more of a concern than the frost damage, especially since Kansas is among the driest areas of the Great Plains.
Another concern is the El Nino effect where we are currently in one of the strongest El Nino events yet recorded, but forecasters are pointing to it potentially changing into a La Nina. This is anticipated to happen in the second half of the year, suggesting that it could mainly have an impact on harvesting of spring wheat, maize and soyabeans in the Northern Hemisphere and winter wheat development in the Southern Hemisphere.
In planting terms, it could affect soyabeans and maize crops in the Southern Hemisphere and winter wheat in the Northern Hemisphere.
El Nino was first recognised as early as early as the 1600s giving a distinct warming of waters in the Pacific Ocean and causes oscillations in atmospheric patterns. This air movement picks up moisture and then rises above eastern Australia giving rise to rainfall.
Typical weather impacts that El Nino has caused are dry conditions in South Africa, wetter conditions for the southern US states, dry conditions in India, weaker cyclones in the Philippines and rain in the Australian grain growing regions. To date, the current El Nino has been of benefit to US growing conditions, bringing drought busting rains to key production states.
Historical trends suggest that a weakening El Nino has a 50% chance of turning into La Nina, bringing its own typical impacts. La Nina is essentially the opposite of El Nino – a cooler Pacific Ocean giving rise to changes in the atmosphere and, again, some typical weather impacts.
In Australia, La Nina generally results in above average rainfall over many areas, which is the opposite of El Nino. In the US, the last 15 La Nina events saw temperatures above normal across central US and less rainfall in areas of the Plains and most widespread drought in the corn belt has typically occurred during July, which is a critical yield determining month.
In previous La Nina years the average maize yield has dropped by 9% compared to other seasons.
However, the effect this year will be diminished compared to previous La Nina events due to the availability of plentiful grain supplies globally.