A WET week and what a wet one it was – with seven consecutive days of recorded rainfall of 49mm in my part of the eastern Borders – although nothing, really, compared to the flooded areas of the Borders and Cumbria.
Of course, such violent floods will have a knock-on effect on livestock, and also on crops in the ground as there has been extensive field damage and land slips. Plus crops never do well with their feet standing in water and there’s plenty of that around in Scotland.
As well as weather volatility, there has been some price volatility caused by the European Central Bank announcing a further cut in the overnight deposit rate in an attempt to encourage increased lending. The markets had been expecting a more aggressive cut, so this resulted in a surge in value for the euro.
It was also announced that quantitative easing will not be increased, but the existing QE programme has been extended to end March, 2017, rather than September, 2016. As a result of all this, the euro fell from €1.41 to €1.39 against £1 in under an hour.
The nett result was a rally for UK oilseed prices and UK feed wheat futures, which were up £1 per tonne to £118.25 and was the biggest daily rise for UK feed wheat futures since the beginning of November. The value of the euro against the US dollar surged as well with rises witnessed for the key US cereals and oilseeds futures.
Earlier, before the ECB announcement, the UK’s large wheat stocks surplus had pushed London May, 2016, futures to a new contract low of £117 per tonne before bouncing back a little, while, on May 16, feed wheat futures were down 15p on the week to £117.35 – however, they rose this week to £118.25. Oilseed rape futures were up £3 on the week and again this week up again by 90p.
Latest supply and demand figures have put 2015 wheat yields at 8.82 tonnes/ha, resulting in total production of 16.71m tonnes. Opening stocks are estimated to be 56% higher than last season due to a carryover of stock of 2.426m tonnes. This means that the UK has an exportable surplus of 3.549m tonnes, 24% higher than last season.
UK wheat exports are expected to reach 1m tonnes by the end of this month, but imports of 600,000 tonnes of quality wheat, mainly for bread-making, will be here by the end of the year as well. EU soft wheat export licences granted to date stand at 9.8m tonnes, compared to 12.7m tonnes last year at this time.
EU barley exports were up from 4m tonnes to 4.7m tonnes and maize imports were up from 3.1m tonnes to 4.7m tonnes.
Usage of UK wheat by brewers, maltsters and distillers, from July to October, was down from 2.29m tonnes to 2.15m tonnes and wheat usage in animal feed rations was down by 6.3% last October, compared to barley use for the same period which was up 9.7% year on year.
UK ex-farm price for bread milling wheat was up £1.30 to £118.50 and feed wheat was down 80p to £106.40. Feed barley was up 90p to £98.10 and oilseed rape delivered Erith was up £4 to £272 per tonne.
Feed and malting barley prices remained largely unchanged this past week as lower sterling and a stronger euro meant futures’ market moves cancelled each other out – so at least sterling’s weakening helped to prevent price falls.
It’s a case of ups and downs elsewhere in the world. French winter wheat plantings for harvest 2016 are at their highest level since 1936 at 5.22m ha, or up 50,000ha on last year and the highest area sown in 80 years, but, following a poor 2015 monsoon, at just 86% of normal, Indian wheat plantings are currently 28% below last year to date and the planting window closes later this month.
Ukrainian winter crops are rated 64% ‘good to satisfactory’, compared to 82% last year and 91% the previous year.
In contrast, the Russian wheat crop is rated at 89% ‘good to satisfactory’, compared to 84% in 2014.
Turkey – the largest buyer of Russian wheat – is seeking alternative sources after political tensions rose following its shooting down of a Russian fighter plane. It may buy more from Ukraine, but there could also be an opportunity for EU wheat exports which are currently down from this time last year.
Australia is now experiencing its strongest El Nino weather phenomenon in 20 years, bringing very dry weather to wheat growing regions. Yield impact and quality downgrades are forecast to hit production by 5%, which is 1.3m tonnes less than September’s estimate.
El Nino is not the only weather event to influence crop yields in Australia. As well as its effect in producing dry conditions, so does a positive Indian Ocean Dipole (IOD) event. An IOD affects the climate of Australia and other countries that surround the Indian Ocean basin, due to ocean and atmosphere differences. Positive IOD events are usually linked to lower rainfall in central and south-eastern Australia and are likely to occur during an El Nino year.
The UK’s OSR planted area is estimated below 2m ha, against 2.3m ha last year. This would be a seven-year low and is partly as a result of neonicotinoids being banned which resulted in crops being re-sown or replaced with other crops.
Argentina has cut its soyabean export tax from 35% to 30%, so a large flow of soya from there is expected over the next few weeks and farmers there are expected to plant an additional 350,000ha of maize as their maize export tax, currently at 20% and wheat export tax at 23% are both going to be removed completely.