Tag: barley

Grain & Oilseed Market

This month, the first UK wheat and barley supply and demand figures for harvest 2022 were published by AHDB.  A 15.7 million tonne crop has left the UK looking well supplied.

Given the increase in available supplies relative to last season, the discount of UK feed wheat futures to Paris milling wheat futures has grown.  This will prompt increased export demand for UK grains.

The Pound closed on Friday 21st October at £1=$1.13, almost 7% lower against the Dollar than on 1st July.  It is worth highlighting that this is up significantly from the low of £1=$1.07 at the end of September.  The political and economic uncertainty in the UK that has caused the Pound to weaken at least increases the attractiveness of UK exports.

Wheat values have bounced around over the course of the past month, mostly driven by uncertainty over the Ukraine-Russia grain shipment deal.  However, with things returning to the status quo in the Black Sea, at least for the time being, grain values have fallen back.  On Friday 21st October, ex-farm feed wheat was worth £256 per tonne, down £12 per tonne from 23rd September.  Milling wheat prices have fallen £11 per tonne over the same time period to £311 per tonne.

AHDB’s barley supply and demand estimates shows UK production at 7.2 million tonnes.  The commentary alongside the estimates highlights a decline in barley demand in animal feed driven by a switch to wheat.  Barley is currently at a £19 per tonne discount to feed wheat.  If demand falls further, without a strong gain in exports the discount will grow.  Given the reductions in the size of the pig herd, a fall in barley demand seems likely.

In the next three months, the size of the South American maize crop will be a key driver of price.  Brazil and Argentina are key suppliers globally and are set to experience a third successive la Niña. The weather pattern brings drier than normal weather and tends to reduce output.

UK ex-farm oilseed rape is worth £521 per tonne, up almost £30 per tonne on the month.  Vegetable oils are the key driver of support for oilseed rape.  The destruction of a key sunflower oil processing plant in Ukraine, uncertainty over palm oil output in Southeast Asia, and strong EU purchasing (both rapeseed and sunflower seed) combined to support prices.  A large soyabean crop, globally, and expectations of big canola (OSR) crops in Australia and Canada is tempering prices.

Feed bean values continue to move lower on lacklustre demand both domestically and for export.

UK Grain and Protein Prices

Recent rainfall has been beneficial, and planting of winter cereals is underway in parts of England.  The East in particular, however, remains very dry.  Primary cultivations are being completed, but increased fuel use and worn metal from hard ground is raising costs.

Unsurprisingly, UK grain and protein markets continue to follow global trends.  UK feed wheat values have moved back up to £260 per tonne (spot) for the first time since the beginning of July.  New crop (2023 harvest) values are likely to be around £10 per tonne below this value.  This based on the assumption that they are worth around £10 per tonne below November 2023 feed wheat futures.  In reality, it is hard to gauge a value for new crop wheat in such a high-priced market.

Milling wheat is currently at a £40 per tonne premium to feed wheat.  Early data from the AHDB Cereal Quality Survey shows that protein content is down this year; averaging just 12.5% on UK Flour Millers Group 1 varieties.  This does not necessarily mean that there will be an increased premium for ‘in specification’ wheat, with much depending on the performance of the crop in baking trials.  At the moment, the crop is thought to be performing well.

Feed barley is moving at a discount of approximately £20 per tonne to feed wheat, or £240 per tonne. The discount is at broadly normal levels, given the elevated price of grains.  Demand for barley will be lower this season owing to the reduced size of the pig herd.

Globally, it appears that there is going to be a much-improved supply of oilseed rape and other oilseeds this season.  This is primarily due to increased production, year-on-year, in Canada.  As a result, the price of rapeseed, nearby, has moved to pre-Ukraine war levels, to around £500 per tonne.

Feed bean values have moved back up with wheat values.  That said, pulse markets are thought to be well supplied, both domestically and globally.  Increases beyond those tracking wheat are unlikely especially given expectations of favourable weather for crops in Australia; a key export market competitor, during their spring.

Crop Areas 2022

Defra has published the first official crop area figures for harvest 2022.  These only relate to England at the moment; full UK figures are due next month.  Given the raft of data previously published on crop areas, there are no real surprises in the release.

In 2022, the English wheat area was 1.67 million hectares, an increase of 13,000 hectares on 2021.  Wheat area increased in all regions of England, except the Eastern region where area fell by just 0.3%.  The rapeseed area increased by the largest amount year-on-year.  Oilseed rape prices were considerably higher than in recent years during July to September last season.  As a result, the OSR area increased by more than 54,000 hectares, up 20% on 2021.  There were large increase in the East Midlands (+11.4Kha), West Midlands (+8.7Kha), Yorkshire and the Humber (+8.5Kha), and the Eastern region (+8.5Kha).  Further increases in OSR area were anticipated for harvest 2023.  However, given the incredibly dry summer and lack of rain in late August/ early September for many regions, planting issues will limit the increase.

The rise in rapeseed area for 2022 was, seemingly, at the expense of barley and oats.  The overall area of the barley crop in England was the lowest since 2015, at 782,000 hectares.  Spring barley area fell by the largest amount, down more than 60,000 hectares.  The planted area of oats fell by 19,000 hectares, to 140,000 hectares.  The area of rye in England has increased considerably in the last ten years.  In 2013, it was just 6,000; in 2022 this had increased to just below 40,000.  The crop has potential in multiple markets, including pig feed, which is likely a driver of the increase.

The first official Defra harvest estimates for cereals and oilseed production in are typically published in October, followed by the final UK results in December.  Looking to the 2023 harvest, the results of the ‘AHDB Early Bird’ survey (conducted by Andersons) will provide the first robust indication of areas.  Regional results will be available in December 2022.

Harvest 2022 and Prices

Overall

The UK grain harvest is all-but finished now and, overall, has produced excellent results.  Completion by the end of August must surely be a record?  The exceptionally dry and hot weather conditions have brought with it opportunities, but also challenges.  Almost all the harvest will have been gathered dry, but hot.  The grain drier was not needed to reduce moisture for almost all farms.  Yet some used them to cool grain.  Now the nights are cooling, farmers should be turning fans on to reduce the grain temperatures.  As frosts arrive this will be a useful time to cool the grain further.

Numerous farmers have experienced field fires with losses of standing grain.  At this stage we have no measure of how much has been lost in this way.  That risk is now subsiding, but farmers must pay attention to their straw stacks.  They should make more, smaller stacks than usual and preferably hidden from sight to as not to attract attention.

Wheat

Reports suggest this year’s wheat crop is excellent quality with a good yield.  After the dry conditions we have experienced since June, it is easy to forget the very useful spring rains we received as grains were starting to fill.  This was just as important as the ripening sunshine and the dry harvesting conditions we have had this summer.

Some reports suggest many farms have experienced greater than usual variation of  protein levels within the same varieties.  This means that grain sampling should be given particular attention this year.  Any additional mixing might be useful if this is possible, as segregating protein levels is difficult and probably now too late to do.

New crop wheat prices fell in the latter part of August.  Earlier in the month world grain markets were driven up by reports of very dry weather in the maize growing regions of the US.  In addition, China was claiming a wheat crop catastrophe, with very poor conditions, suggesting fairly extreme crop failure conditions.  However, it now turns out that China has harvested more wheat than last year!  This reduced forecast Chinese import demand.  Concerns around the Chinese economy have also dampened expectations of Chinese buying.  The last few days have seen rain in the Mid-west of the US which has eased concerns about the maize crop and pulled down all grains prices.

The other global factor of note is Ukraine.  Last month, we talked of how Ukraine and Russia had brokered a deal to allow Ukrainian grain exports to restart.  Grain was stuck in elevators, stores and farm barns.  We were skeptical it could be exported quickly or even reach the ports in many cases.  In fact, almost two thirds of a million tonnes were exported in the first three weeks of August.  Furthermore, the programme is continuing with expectations of 3 million tonnes going out in September.  Not only does this provide grain that the world market had largely written off, but also makes storage space for the new crop.  The Russian crop has also been good and exports have been high – partly making-up for the tonnages lost to the world market from Ukraine.

Barley

The UK barley crop is proving to be of a particularly high quality; most growers are thrilled with their results.  However, when everybody shares such success, the market reacts.  Indeed, the feed wheat:barley spread has grown to up to £20 per tonne and prices might have to decline further as UK barley is still not competing in the export market.  Furthermore, the malting specification, especially for springs is so good that many crops that would have achieved malting specification in previous years will end up being fed.  The malting premium has been falling as so much of the crop meets the required specification.

Reports from Scandinavia and other parts of the EU also highlight high quality and good yields, suggesting the UK malting barley crop faces some stiff competition in the marketplace this autumn.

Beans

Beans ripened almost too quickly this year.  Being usually among the last crop to go through the combine, their ripening from the high temperatures was a little premature.  Small bean size, especially in the spring beans, will have reduced the crop size to an extent.  Shattering bean-pods has also been an issue.  However, overall most farmers are relatively happy with their crops.

OSR and Drilling

The oilseed rape harvest was completed in record time.  This was the case throughout Europe as well as in the UK.  Not only is Europe reporting 10% more OSR than last year, but the Canadian crop is apparently half the size again from last year.  Australia too, is reporting 10% more area this year.  Even in Ukraine, where the crop had been partially written off, a reasonable tonnage has been harvested; more than one might have expected in the circumstances.  Prices have fallen in response and are now at or near to the levels in February – before the Ukrainian war began.  This is £220 beneath the highs of mid-May.

Little OSR drilling has taken place so far, with soils too dry to take the seed or allow germination.  What little rain has fallen has barely softened the tops of the soils, rather drained through the cracks in most fields.  Some are becoming concerned with this, although there is still ample time for rains to fall to allow satisfactory drilling and germination.

 

 

UK Grain Market Update

The UK grain and oilseed harvest is well ahead of typical pace. Much the UK barley crop and swathes of the Oilseed Rape crop have been cut. Many farmers are now well into their wheat crops some 7 to 10 days ahead of normal. Early indications point to high bushel weights among winter grain crops.

UK grain markets have tracked global prices in recent weeks. Both new and old crop wheat prices have fallen in response to the availability of grain in Europe and the US. UK feed wheat prices (ex-farm) were quoted at just over £242 per tonne on 22nd July. Milling premiums have also fallen back to around £25 per tonne, ex-farm. However, if high specific weights persist throughout harvest, diluting the proportion of protein, we are likely to see an increased premium for good protein levels.

Feed barley prices have been pressured downwards by harvest progress, quoted at a £31 per tonne discount to wheat, at £211 per tonne.

Oilseed rape prices have also fallen considerably over the course of the last month. Oilseed rape (spot) is now worth £534 per tonne, down from £596 per tonne at the end of June. This is in part  due to the move from old crop to new crop pricing. Similar declines have been seen in November 2022 Paris Rapeseed futures. This points to an overall easing in response to improved supply and weaker demand of oilseeds globally. An increase in oilseed rape plantings is anticipated for harvest 2023. However, a lack of soil moisture may cap these gains.

Feed beans and peas were quoted at £282 and £272 per tonne, respectively (spot, ex-farm). Prices are back to tracking wheat prices closely after wheat had opened up a large premium earlier in 2023.

Harvest pressure is inevitable at this time of year. A greater surplus of UK grain, either for export or closing stocks, is expected in the coming season. This will drive a closer relationship between UK and EU grain prices. While there is short term pressure in prices, long-term the global supply and demand of grains remains tight.

Global Grain Markets

Global grain markets have continued to fall from recent highs as the northern hemisphere grain harvest kicks-off.  The prospect of grain coming onto the market is reducing the build-up of pressure caused by the ongoing war in Ukraine.
On 17th June 2022 the USDA released its latest forecasts of agricultural supply and demand.  Consumption of wheat, barley, and maize combined is forecast to outstrip production in the coming season.  This suggests that while harvest progress is moving prices down at the moment, underlying support remains.  Where prices settle after harvest will depend on many factors, most of all actual yields.
 
Winter crop prospects in the US and parts of Europe have been challenged so far this season.  In the US, the harvest of winter wheat has been quicker than normal so far.  To the 19th June 2022, 25% of the crop is harvested.  Crop conditions in US have dipped again for wheat, but the outlook for spring crops is positive.  This is driving the mixed movement in prices.
 
In the EU, persistent dryness throughout May and June has resulted in yield estimates for wheat and winter barley falling below the five-year average.  The impact is not limited to one region of the EU with dryness affecting many of the key grain producers.
 
Russia is expected to harvest a bigger than average wheat crop this year.  The impact of this crop on global prices will depend on the level of the crop available to be exported.  At present exports are also forecast to increase compared to average, but much will depend on how easy it is for Russia to export the crop in light of present tensions.  Russia has increased its export taxes to preserve wheat for domestic consumption.

UK Arable Market Update

With harvest creeping ever closer, attention remains on the weather in the UK.  Generally, crops are looking healthy, benefitting from rainfall in the latter half of June.  Concerns had been growing around the heat in the middle of the month and AHDB’s Crop Condition Survey highlighted crops moving backwards to 24th May, relative to the end of April.

UK prices have recently fallen, tracking the decline in global markets.  Trade in old crop is now largely over and attention from buyers will be focused on new crop.  Demand for new crop, in particular barley, is likely to be lower next season driven by a decline in the size of the UK pig herd.

UK feed wheat values have fallen, November-22 futures closed at £282 per tonne on 23rd June, down almost £36 per tonne from the end of May.  November-23 futures have fallen by £20 per tonne to just over £248 per tonne.

Barley prices have also dropped, feed barley for harvest movement is trading at a £32 per tonne discount to wheat.  Malting premiums have reportedly firmed slightly although the feed base has fallen.  The winter barley harvest in the UK is now imminent.

Oilseed rape prices have responded to weakness in global vegetable and mineral oil prices.  Concerns over the global economic picture has been coupled with expectations of large soyabean crops in South and North America.  UK ex-farm oilseed rape prices have fallen £775 per tonne at the end of May to £596 per tonne, as at 24th June.  Field bean values have generally fallen with other output prices, albeit at a slower rate. As of 24th June, beans were quoted at £306 per tonne (spot, ex-farm).

UK Grain Market Update

UK grain markets have, unsurprisingly, followed the global direction in prices over the last month.  Wheat prices are higher, month-on-month, although wheat futures are lower than recent highs. Ex-farm feed wheat (spot) was quoted on 20th May at £326 per tonne, with a milling premium of £27 per tonne.

AHDB crop condition figures showed crops to be in good health through to the end of April.  Some 83% of winter wheat and 84% of winter barley rated as ‘good’ or ‘excellent’.  There has been rainfall across much of the UK in May.  However, rainfall in England was still behind the long-term average for the month, up to the week ending 17th May.

New crop UK feed wheat futures are also considerably higher than a month ago.  On 23rd May November-22 futures closed at £332.50 per tonne, up almost £45 per tonne on the month. Challenging conditions for crops in the US and EU are combining with ongoing uncertainty in the Black Sea region.

Prices for the 2023 crop have also risen.  November-23 feed wheat futures closed on 23rd May at just over £271 per tonne, up almost £20 per tonne on the month, but down from a high of £295 per tonne on 16th May.  The direction of the 2023 crop is uncertain at present, especially with limited futures trade.

Ex-farm feed barley prices also increased during the month, but only marginally.  The feed barley discount to feed wheat was quoted at almost £22 per tonne on 20 May, driven by a lack of interest from both buyers and sellers.

The price of oilseed rape has fallen in recent weeks, but nearby prices were still in excess of £819 per tonne, ex farm. Recent market reports highlight further falls in delivered prices for both harvest 2022 and 2023, with the latter now quoted at £580 per tonne delivered into Liverpool. This reflects Indonesia lifting its palm oil export ban.

Pulse prices had lagged behind the rises seen in other commodities.  However, feed bean values increased by £26 per tonne across the month, to £328 per tonne.  Premiums for new crop beans are squeezed.

UK Arable Markets

UK winter arable crops are looking in good order, according to a recent AHDB Crop Condition Survey, conducted at the end of March.  That said, March was drier than normal, a trend which has continued through April.  The long-range weather forecast suggests dry weather will continue for most areas of the UK.  This may start to impact potential yield if it carries on for a few more weeks.

UK arable markets have followed the global trend.  Nearby ex-farm feed wheat prices gave moved up to £308.20 per tonne in the week ending 22nd April 2022. Prices had fallen coming into April but have gone on to set new highs.

The price of ex-farm feed barley has narrowed the discount to wheat throughout April.  In the week ending 22nd April, nearby feed barley was quoted at £303 per tonne.  Wheat and barley prices have now risen by more than £83 and £94 per tonne respectively since Russia’s invasion of Ukraine.

The rise in prices has helped to offset some of the rise in input costs, with fuel and fertiliser experiencing sizeable uplifts.  There are indications that the price of ammonium nitrate has now fallen back from recent highs.  But high input costs will still represent a significant challenge for the 2023 crop.  New crop UK feed wheat futures have been trading at around £250 per tonne since the middle of April.  This may offer a useful hedge against high input prices for the coming season.

Most arable farmers will have already ordered their spring fertiliser – often some months ago.  There have been reports of availability issues for orders made this spring.  However, there is currently no shortage of fertiliser in the UK.  In fact, the main UK manufacturer is having trouble selling what is producing (perhaps not surprising given current prices) and is exporting considerable tonnages.  The issue with delivery and long order times are mainly for those ordering part loads and are largely due to logistics.  Those with a less-than-stellar credit history may also struggle.  Manufacturers and merchants are having to deal with their own cashflow pressures and do not want any bad or late debts.   

Rapeseed prices have also risen, with Ukraine a key producer of sunflowers and rapeseed.  Ex-farm oilseed rape prices are quoted at more than £845 per tonne; a 40% increase since 25th February.

One crop that has not seen the same degree of price rise is beans, which were quoted at £302 per tonne, ex-farm. This is the first time beans have been quoted at a discount to barley since December 2006, demand for feed beans by UK consumers is reportedly lacking.

Arable Markets

A week is a long time in politics, and given their intertwined nature at present, so too in grain markets.  As the war in Ukraine enters into its second month, the impact on grain and oilseed markets has been considerable.  This is not surprising when we consider the reliance the world has on both Ukraine and Russia for grain and oilseed supplies.

The Food and Agriculture Organisation (FAO) of the United Nations held an extraordinary general meeting earlier in March, to discuss the challenge of the war in Ukraine.  The report from the meeting highlights 26 countries which rely on Russia and the Ukraine for more than 50% of their wheat imports.  Some of those nations will be relatively small importers.  However, it is worth noting Egypt, which imports more than 15 million tonnes of wheat annually.  Historically, 70% of Egypt’s wheat imports have been sourced from the Black Sea.  Whilst we can expect markets to be volatile long after the end of the war, much will depend on how the nations who rely so heavily on Russia align themselves politically going forward.

Farmgate grain prices have risen considerably over the course of the last month.  Nearby farmgate feed wheat was worth £292.90 per tonne on 18th March, up £69.40 per tonne from 25th February.  The value of farmgate prices has been driven by futures market volatility.  This is, in turn, making markets challenging to price.  Milling wheat prices have also seen increases, although the premiums over feed wheat have remained relatively stable.  Feed barley values have also increased considerably, following the direction of wheat markets.  Farmgate feed barley increased £67.90 per tonne from 25th February, up to £277.80 per tonne on 18th March.

Outside of the conflict in Ukraine, the grain market would likely be seeing support anyway.  Dry conditions over winter in the EU and US, will cause some concern on wheat markets.  Drought conditions are also seen in North Africa, if this persists, we can expect increased import demand globally.

Oilseeds prices have also risen considerably in recent weeks. Paris rapeseed futures (May-22) traded at more than €1,000 per tonne on 23rd March.  As with grains, there is a global reliance on the Black Sea for rapeseed and sunflower oil.  Ex-farm UK oilseed rape prices were quoted at £742.50 per tonne on 18th March.

Pulse prices have also gained over the last month.  However, the gain in the value of pulses has been limited compared to that in grains and oilseeds.