Tag: pulses

Grain Markets

Global Grains

Global grain markets are largely unchanged on the month.  There has been some short-term support, but there is a distinct lack of news to sustain any price increases.  Both the USDA and the International Grains Council (IGC) published their latest world grain and oilseed supply and demand estimate updates.  For grains, both organisations made downward revisions to global ending stocks, the USDA by 2Mt and the IGC by 6Mt.  In both cases the downward revisions come from reductions to maize stocks.  That said, the month-on-month reductions to the outlook are a drop in the ocean relative to the forecast 60 million tonnes of stocks.

With the US maize harvest 59% complete, the next important drivers for grain and oilseed markets are likely to come from the southern hemisphere.  The picture in Brazil is split, where excess rainfall in the south is delaying soyabean plantings, whilst more rainfall is needed in the north of the country.  If this continues it has the potential to support soyabean and so rapeseed prices.  Beyond this, attention will turn to South American maize planting.

UK Market Update

It’s been a challenging drilling window for many so far this year.  Whilst the autumn has been mild, the stop-start rains which prolonged harvest have continued.  Reports suggest that pest pressures are increased, particularly for oilseed rape with both flea-beetle and slugs a problem.  The relatively mild weather has seen widespread flea-beetle damage in rape crops further north than usual.  In addition, storm Babet left many fields, particularly in the Midlands, East Anglia and Scotland under water.

As with the global market, UK wheat prices are relatively unchanged month-on-month.  There are odd opportunities to benefit from short-term spikes.

The AHDB published its ‘Early’ Balance Sheet for the UK wheat and barley market.  For wheat, whilst the carry out stocks from last season are up significantly (9% year-on-year), AHDB estimates the 2023 wheat crop to be significantly smaller (14.1Mt).  This is due to a much smaller planted area than had been expected.  Consumption of wheat is also seen increasing, with both ethanol plants expected to remain operational.  There is also expected to be a switch from barley to wheat for some animal feed compounders.  With a smaller pig herd and poultry flock and reports of reasonable forage production for ruminants, there will be questions over the level of animal feed demand this season.

The UK wheat market is left in a broadly similar position as it was in the 2021/22 season. However, the lack of support in global markets and little domestic activity is keeping prices subdued.  Defra will provide another update on the size of the UK wheat crop in December.

For barley, large opening stocks and decline in animal feed demand are expected to outweigh the drop in production year-on-year.  As a result the UK is expected to have 1.5 million tonnes of barley which will either be held as stock or exported.  Small volumes are moving, but there are currently cheaper origins than the UK for barley.

Whilst feed markets may be under pressure, there continues to be strong premiums for milling wheat and malting barley.  Milling wheat premiums are in the region of £65 per tonne and malting barley premiums have reached as much as £85 per tonne.  The importance of knowing and maintaining the quality in the barn cannot be overstated this season.

Pulse prices have remained firm against other combinable crops, although there are suggestions that feed beans and peas may be displaced by cheaper protein sources into animal feed.  The trade expectation is that prices will fall.

UK Arable Outlook

As harvest draws nearer, UK wheat prices have increased, supported by concerns for US maize and prolonged dryness in Northern Europe (see preceding article).  In the week ending 23rd June 2023, ex-farm feed wheat was quoted at £175 per tonne; up almost £15 per tonne on the beginning of the month, but still just behind the May average of £176 per tonne.

AHDB Corn Returns data shows a positive carry into new crop prices, with feed wheat for September delivery averaging £196 per tonne in the week ending 22nd June.  Milling wheat continues to command a strong premium of nearly £66 per tonne, with the price quoted at £241 per tonne, ex-farm.

Barley prices have not gained to the same degree as wheat prices, up £8 per tonne on the beginning of June.  Ex-farm barley is quoted at £156 per tonne – demand for old crop feed barley has increased slightly but remains slow.  The UK is currently not competitive into export markets.  This could continue to pressure prices with a large carryout expected from harvest 2022, and barley now ripening and harvest not far away in the South and East.

Oilseed rape values had strengthened through June, reaching £346 per tonne in the middle of the month, before falling again.  Weaker than expected biofuel mandates in the US pressured soyabean oil prices, dragging the wider vegetable oils complex lower.  Subsequently, ex-farm oilseed rape was quoted at £326 per tonne on 23rd June.

Pulse prices picked up during the month with some renewed demand, but selling reportedly remained limited.  Both feed beans and feed peas were quoted at £241 per tonne, on 23rd June.

Grain Market Roundup

As the conflict in Ukraine continues, the value of commodities has risen considerably. On Monday 7th March UK feed wheat futures (May-22) closed at £303 per tonne, a rise of almost £68 from 23rd February, the day before the invasion began. While prices have risen, daily movements have been volatile. Russia and Ukraine account for more than 28% of world wheat exports, as such developments in the conflict will have large ramifications for prices.

Despite the large rises in output prices as a result of the conflict, input prices are equally inflated. Russia is a key producer of fertiliser and exporter of fuels. The price of fuel is likely to stay inflated, with the UK and US governments announcing, on 8th March, their intention to ban Russian oil imports. The UK ban will be phased, Russian supplies of fossil fuels account for 8% of UK imports.

 

Outside of global politics, the International Grains Council (IGC) lowered its estimate of global grain stocks for the 2021/22 (current) season.  This was due to cuts in Southern Hemisphere maize production forecasts where dry weather is impacting on crop expectations.  This is also likely to be a continued driver of grain price rises.

Despite the factors globally which point to further grain price rises, we also need to consider the new crop (2022/23) when looking at the direction of grain prices.  The IGC has tentatively forecast an increase in grain stocks; as we move nearer to the new crop market the expected availability of the 2022/23 crop will have an increasing influence over prices. On 9th March the USDA is set to update its world supply and demand estimates, these will be watched closely.

In the UK, milling wheat premiums remain high relative to recent seasons.  Milling wheat premiums will be watched closely as we move towards spring in light of the high cost of nitrogen.  Feed barley prices have followed the same path as wheat prices, tracking lower through February before recovering.

Ex-farm oilseed rape prices have fallen back from their December high of £627 per tonne.  Rapeseed prices have responded to the incredibly tight UK, European and Global oilseed rape supply and demand.  However, prospects for the new crop are for improved supplies.  This will lead to lower prices than we have seen this year.  Of course, there is some time before the rapeseed harvest and the fundamentals still have time to change.  Soyabeans also need watching for the direction of rapeseed.  The dry weather in South America has supported soyabean prices and tightened the supply and demand outlook. The United Nations Food and Agriculture Organisation cut its estimates of South American soyabean production by 13.5 million tonnes (3.7%), earlier in March. A tightening of global vegetable oil and oilseed markets will lead to price rises.

Pulse prices remain flat through January and February, moving by just £1 per tonne across the last month.

November Arable Roundup

The price of UK cereals have continued to show strength throughout the last month.  Concern over global availability has pushed the value of May-21 UK feed wheat futures to fresh highs. Additionally, new crop (Nov-22) feed wheat has been trading at more than £200 per tonne through the latter half of November.  This offers a good opportunity to think about your average prices for next harvest.  This support in the futures market has translated into strength in ex-farm prices.  In the week ending 18th November, AHDB Corn Returns prices quoted ex-farm UK feed wheat at more than £214 per tonne.

One of the main drivers behind the continued strength in grain prices has been poor weather, delaying harvests in Australia, and causing quality concerns.  Available stocks in the Northern Hemisphere wheat exporters are tighter this season than they have been for many years.  The market is looking to Australia (and Argentina) to relieve pressure in the market.  However, delayed harvests and quality concerns puts a squeeze on availability.

Domestic milling wheat prices are also showing continued strength at present.  UK ex-farm milling premiums were quoted at just over £52 per tonne over feed wheat, in the week ending 18 November.  This reflects tight availability of quality, domestic wheat.

Barley values also remain supported.  The discount of feed barley to feed wheat has narrowed to levels last seen in August 2019, at less than £10 per tonne.  The surplus available for either stock or export this season is seen at the lowest level since 2018/19.  Strong domestic demand early in the season, combined with 267,000 tonnes of exports up to the end of September, has eaten into the exportable surplus and narrowed the wheat-barley spread.

Oilseed rape prices have backed off slightly over the course of November.  This is not overly surprising given how strong rapeseed prices have been.  The value of rapeseed oil is curtailing demand and this has removed some support for rapeseed prices.  Strength in the Pound has also pressured domestic rapeseed prices.  Sterling hit the highest point against the Euro since February 2020 in November.  This trend in Sterling may continue as we move towards the next meeting of the Bank of England Monetary Policy Committee on 16th December.  Close attention will be paid to decisions on interest rates at the meeting, with inflation still prevalent in the economy.

Pulse prices are also remaining firm for human consumption markets.  As with wheat, wet weather in Australia is causing concern for short-term availability.  Feed markets are under some pressure, with buyers absent in the short term, either through having purchased sufficient volumes or due to a lack of haulage making any further buying challenging.

Grain Market Update

Old Crop

Technical changes:  Towards the end of the grain marketing season, markets respond to the fundamentals of grain supply and demand differently.  Attention turns increasingly to the fundamentals affecting the new crop.  The increasing amount of information about new crop overtakes the dwindling old crop commentary.  Not Much old crop grain remains uncommitted in barns.  This increases the impact from new crop fundamentals.  Secondly, the volume of new crop being traded is rising all the time. This surpasses the declining volumes traded of old crop, especially this year with such small amounts of old crop wheat to start with.  This accelerates when the last old crop wheat futures market expires as is the case now as we enter May.  Market fluidity also declines when futures markets are not available.  The technicalities of closing contracts held becomes a physical issue either having to physically deliver them or close the position.

Fundamental changes:  Grazing animals have gone to pasture.  Unfortunately, grass is not forthcoming because of the dry and cold weather. Consequently, demand for feed barley has picked up from feed manufacturers in what would normally be the last embers of the old crop campaign.  Unsold old crop grains might experience a surge in the last month of the market before new crop harvest.  Other old crop users; millers, maltsters and other feed compounders are trying to get to the cheaper new crop with minimal carry-over.

The pulse market sometimes takes a small bounce as the last vestiges of the old crop market are mopped up and sent off on a boat.  This has happened with some local buying interest but the Egyptian market is dominated by the Australian crop now though so any business will represent the last breaths of an old crop trade.

New Crop

We are all aware of the need for emerging (spring) crops to receive rain in almost all of the UK.  In fact, there are dry conditions from the US Midwest, to the far side of Europe.  Agronomists think that the lack of moisture is starting to affect yield potential in many parts of the world and UK.  Winter crops have a remarkable ability to recover from dry weather conditions.  Drought initially affects markets more than crops, especially when it is international.  At the start of April, cereals prices were heading down, having peaked in January.  Since then, they have roared back up by nearly £20 per tonne, to contract highs, and a day or two more of dry conditions and they could go further.  Clearly, heavy rains could reverse much of these gains.

Dry spring conditions of course affect spring crops as well as winter.  Globally, two third of feed grains are are spring grown.  Thus, concerns from consumers are encouraging them to book what might be a scarce resource in the coming 12 months.  Speculators, not wanting to buy grains, but to cash in on the rising market values have also been wading in on the game, exaggerating the movements.

Barley price has risen more than wheat.  Not only is two thirds of the crop spring-grown in the UK, making it more vulnerable to drought, but the spring barley crop area has fallen back considerably to ‘normal’ levels.  The new crop feed barley discount to feed wheat has come back down to the conventional levels of sub £15 per tonne.

Soybean prices have reached their highest values for 8 years.  UK oilseed rape has gone up by another £20 per tonne.  Demand for soyabeans from China is higher than ever, despite the ill-found concerns from last year’s African Swine Fever.  The rapidly returning stock of breeding pigs is replacing the gap left from the porcine cull.  This required lots of beans to feed them with then oil cook them in.

New crop pulses have not really started trading.  The quality of beans being very unpredictable ahead of harvest, after which, market open.

Grain Market Thoughts

The world grain and oilseed markets remain dominated by a seemingly insatiable appetite by China to import ever-increasing tonnages of all grains and other commodities.  It has been importing most of the world’s traded soybeans for many years now but has only recently entered the market for colossal amounts of maize and wheat too.  This demonstrates that the Chinese agricultural policy of hundreds of years of being self-sufficient in grains is well and truly finished.  According to statistics published monthly by the USDA, the Chinese now hold not only two thirds of global maize stocks (9-months’ Chinese demand), but also 50% of global wheat stocks, 35% of soybeans 60% of rice stocks and 40% of the cotton.  Something is going on.  Some global food supply reports suggest China is about to experience a major food shortage and global food prices are therefore likely to rise any time soon.  Other reports suggest the stock levels are quite wrong and China is not hoarding quite so much.  The truth is likely to be that even the USDA does not really know for sure what China has (perhaps the Chinese cannot be so sure), and of course, being part of the US Government, the USDA could have another agenda, but it’s the best information we have.  China did build up similar stock levels at the turn of the Millennium, so it is not unprecedented.  It subsequently then ran down stocks, contributing to a bearish grain market for some years.

This time of year, crop reports from around the world are a major factor in the pricing of the new crop.  People might look first at the eye-catching old crop prices, but as most of that will be sold by now (or at least committed and priced), the new crop is of more significance.  November 2021 futures closed on the 25th March at £33 per tonne lower than May 2021, at £166 per tonne.  Russian analysts have recently reported good growing conditions for their wheat and increased their tonnage projection by 3 million tonnes (to 79 million) despite relatively poor crop ratings.  The Ukrainians too have done the same, reporting their wheat is in an excellent state and the positive reports travel through Europe too with Strategie Grains also posting good yield expectations for European wheat crops.  Despite the avid export of all grains to China, it is these positive prospects for production that has taken the edge off the grain prices in the last month.

New crop barley, whilst still having a larger discount to feed wheat than most years, has at least fallen to £15-£20 per tonne from feed wheat which compares favourably against the £30+ discount for old crop.  Not only is the production far lower than last year, but also we can hope that come June, people might start drinking more beer again so the malting industry might be rekindled.

The oat market took a boost this month with news that a new oat buyer is planning to set up in Peterborough.  Oatly, a Swedish company will make milk from oats to supply the growing market for animal-milk alternatives (see below). Farmers have found oats a very useful crop agronomically in recent years, but held back from growing it as few buyers have been in the market, so perhaps this will encourage a greater cropped area.

Oilseed rape for post-harvest looks as encouraging as this season’s prices have proven to be.  Perhaps some growers who opted away from the crop will be looking at these bid prices wishing they had tried growing it again.  Perhaps next season, the crop will experience a resurgence of area cropped.  The supply and demand table continues to look tight for new crop because, despite a likely rise in production from Canada, the largest producer, the other main regions (particularly Ukraine and Australia) look set to be lower.  Europe will remain in deficit too with large planted area reductions throughout the continent.

Demand for pulses has fallen away this month, as is often the case in March, as the Australian crop starts reaching the North African buyers.  The market will be thin from now on, and occasionally closed.

Arable Update

It is early days yet, but the world is gearing up for record areas of maize plantings in the US.  Indeed, the USDA published its predictions in February with exactly that.  It might be expected that this would cause prices to collapse but, of course, the global populations keep rising and so with more mouths to feed, consumption needs to be a record every year, just to keep up.  The market recognised this and quickly calculated the plantings estimated by the USDA might not be sufficient.  Indeed, maize stocks are thought likely to reach a 7-year low at the end of the season.  Prices rose.  This is all rather forward looking as the Midwest (where most US maize is planted) does not get its drills out for another month or two. Southern States like Alabama start in March but more northerly areas such as Illinois (where more is planted) is late April.

Yet, grain and oilseed prices are at 7-year highs, or even higher in the UK and other national markets.  Production is clearly only half of the story.  In fact, the country with most mouths to feed is not only buying ever-increasing amounts of soybean (having imported vast amounts in recent years and hitting a gigantic 100 million tonnes in 2020/21), but is also now buying maize and wheat.  China’s food policy for millennia was to be self sufficient in grains.  This has changed.  The chart demonstrates that when China decides to buy something, it does so in volume.  Its wheat imports have doubled to 10 million tonnes this year and maize imports tripled, adding another 16 million tonnes of new demand to the crop.  The world will certainly feel it.

According to USDA estimates, Chinese wheat stocks at 155 million tonnes are half the world’s wheat reserves, and 10 million tonnes more than China consumes in a year.  China will also carry over enough maize to keep it going for 8 months.  One has to wonder what it is up to, either something big or it will release it all onto the market again at some point, something the Chinese did at the turn of the millennium, an action that contributed to 5 years of low grain prices.

Unusual weather around the world is, ironically, usual at this time of year with plantings and crops emerging from winter in the more southerly countries.  It often affects markets more than it affects crops suggesting it has limited long term impacts.  In the UK, whilst snow melt and subsequent rains have topped up the soil moisture levels to ‘saturated’ in many regions, the warmer weather and winds have also been starting to prepare soils for spring cropping.  A lot still depends on the rainfall in coming weeks though.  Barley remains cheap compared with wheat, and whilst new crop wheat has been steadily rising in price (November futures at £170 per tonne), the discount from old to new crop is about £35 per tonne. There will be nothing carried over this year.

Oilseed prices have been strong, pushed about by currency shifts, and the Chinese business (above), plus poor weather in south America.   Demand in the EU is tight, partly as people throughout the EU have still been driving a lot in the more recent wave of lockdowns and therefore buying biodiesel.  There will not be much OSR in the EU by harvest time.

The pulse market is still busy but possibly falling a bit as the Australian harvest is now in full swing and some of which has already reached the Egyptian shores, depressing demand from the UK.

 

 

 

 

Combinable Crop Markets

The current UK wheat crop of an estimated 10.1 million tonnes is augmented this year by 1.2 million tonnes more imports than last year (over half a million more than usual) and higher carry-over stocks by about half a million tonnes.  The market has always priced the 2020 harvest crop higher than 2019 with a full carry (prices continue rising) from the end of the 2019 delivery period into the 2020 season.  For that reason, more people did not sell their old crop, but kept it into this year.  The opposite is already taking shape for 2021 crop, with a drop of over £40 per tonne for delivered wheat before harvest and shortly after.  Clearly there will be as little carry-over as possible.

Old crop wheat peaked this month at £214 per tonne, a great price to sell at.  However, only one person gets any business at the peak of the market, and that might have been a speculator, not a farmer and might have been a single lot (100 tonnes).  Prices have since declined to a still respectable £205 per tonne.  For those with any crop left unsold, selling at this level should be seriously considered.  As well as the reduced 2020 harvest, the continued weakness of Sterling is helping to buoy domestic prices.

Barley has also risen this month, but the price spread with feed wheat has remained close to or over £50 per tonne – an gap that is almost unheard of.  The new crop price spread is inevitably smaller with less barley and more wheat likely to be harvested.  Nevertheless, it is still between £15 and £20 per tonne, historically quite high.

Oilseed prices have also lifted with the rise of cereal prices worldwide, with OSR gaining £15 per tonne this month at one point.  Pulse prices are currently in a high position, compared with the range they tend to occupy, but arguably low compared with the current wheat values.  They are cheap in the current matrix, but there is a maximum inclusion rate in many compounders’ recipes meaning demand is capped regardless of price.  It will not be long before the generous Australian crop reaches a European harbour, then the value of local beans might fall a bit.

UK Arable Situation

Whilst the barn is not as full as most years, because of low cropped areas and poor yields, those whose wheat remains unsold have been making money from it.  In fact a tonne of wheat has risen by £25 per tonne since harvest.  This means,  for an average yielding hectare of a meagre 7.2 tonnes this year, a rise of approaching £200 per hectare.  That sounds easy, but of course, a large percentage of the wheat never got drilled, and probably, a greater percentage of it than usual was forward sold.  Nevertheless, it is some comfort for those holding stocks.  The AHDB’s Cereal Quality survey confirms the proportion of quality wheat (full specification) is lower than usual too at 32% compared with the 5-year average of 37%.

Feed barley remains at a hefty discount to feed wheat of over £40 per tonne, with lots sloshing around the system.  Not only did the total barley area come close to the wheat area, but the malting varieties in East Anglia averaged high nitrogen levels (1.89%), slightly above the standard for export brewing (1.85%) meaning much is feed barley grade.  Nitrogens were lower in Scotland.  French malting barley is excellent this year.

This time last year, we reported how the British drilling season had halted with only half the winter crop in the ground, many farmers having shut up shop till spring, and many with serious concerns about flea beetle in their oilseed rape.  Conditions have been substantially better this year, but still not great.  Whilst not as wet as 2019, rain has caused several disruptions and drilling is a few percentage points behind where farmers would ideally like to be.  Some establishment has been slow because of waterlogged soils, especially in the heavier land areas.

We also mentioned some farmers had publicly stated they would not grow oilseed rape again.  This does appear to have been carried out, with perhaps even less OSR planted than was harvested in 2020 (quite a drop, because as much as a quarter was written off before harvest).  Establishment is quite good, but on the basis that every year now, some will be lost, we could have an OSR harvest smaller than we have had since the 1980’s.  In terms of planted area, it will remain larger than oats, pulses and maize, but OSR is of less importance in the UK rotation now than just a few years ago.  Pulses appear to be compensating for the lost area, but only partially, with other changes such as increases in second wheats and oats (particularly spring).

Pulses are have a small surge in popularity, both on the back of the point made in the previous paragraph, but also as new crop prices are strong, especially peas.  Both Blues and Marrowfats are offering excellent prices for those who can get a contract and a half decent clean yield at circa £270 and £320 per tonne respectively.  Old crop premiums are not as good though.

Grain Market Update

The UK had a record-breaking cereals harvest in 2019.  No records have been broken this year, perhaps apart from the percentage of oilseed rape written off or the percentage decline in wheat crop from one year to the next!

According to provisional Defra estimates, the total wheat and barley crop was over 18.5 million tonnes – nearly 6 million lower than last year, and all of that decline was because of less wheat (the fall in winter barley was more than compensated for by the rise in spring barley).

The chart shows the main combinable crop areas for the UK for a decade. Under ‘normal’ conditions, crop areas vary slightly from one year to another according to shifting market requirements and other economic influences as well as perhaps a small weather effect.  About once every 7 or 8 years, we see greater shifts in cropping because of inclement weather covering large proportions of the country.  That is not to say we can predict when the next weather event will be of course.

The change in the crop rotation was clearly dramatic, and the amount of resultant crops for marketing is equally unusual.  Whilst farms have a different make-up of the crops they want to sell, the market demands are much the same.  There is a mis-match, which will drive imports and exports to balance supply and demand and is also causing sharp price movements.   Prices for wheat have spiked in recent weeks, having risen by over £20 per tonne for since harvest.  The unusual market also explains why barley has not followed suit as it often does, instead, a price spread over £40 has emerged as evidenced in the graph below.

Demand for malting barley is slim, as Covid restrictions close pubs and bars throughout the country and beyond, reducing their already severely reduced requirement for beer.  The considerable pile of spring barley is finding ample buyers but for feed.  Prices have picked up a little but continue to trade at considerable discounts to wheat in many parts of the world. The new crop price spread is smaller but still £15 to £20 per tonne.  The figure below shows delivered feed wheat and barley prices in UK and illustrates the growing spread between the two crops.

The oilseed rape market for anybody who has any to sell, is thin and, as usual, is led not by OSR, but the soy and palm oil markets.  The lack of OSR in this country has very little impact on prices.  Global vegetable oils are highly susceptible to currency markets and political moves, particularly regarding the relationship between the US and China.  Brexit has little impact on the oilseeds markets as they have no tariffs.  Brexit negotiations affect these markets more because the strength of Sterling changes according to trade deal news.

The pulse trade is small at the moment having become slightly overpriced to other protein markets.  Overall bean quality is not great this year, lowering the overall crop value.