In commenting on current grain markets, similar factors continue to prevail as the last couple of months and the market is still comparatively flat. The November 2017 UK wheat futures contract, which ended on 23rd November, showed a total price variation over its total 2 years and 4 months of being open for trading of £32 per tonne. For 94% of the time it traded within a tight £20 per tonne range of between £125 and £145. There have been single weeks in previous years when markets have moved by £20 per tonne.
For old crop grains, the International Grains Council (IGC) has increased its estimate of 2017 harvested grain crop, increasing wheat by 1Mt and maize by 6Mt. Wheat consumption also rises leaving no net change but maize consumption increases by 2Mt, meaning a small rise in stocks too. We note that whilst half of all global grain stocks are in China, the rest of the world also has ample for now and consumers are not concerned about the whereabouts of their next purchase.
The Black Sea has been, and remains, more competitive for business to North Africa, and so exports from the EU have been slow so far this season, leading to reductions in export expectations and therefore higher carry-over predictions. UK wheat exports have also been considerably slower than last year but with potentially less to export (higher consumption, far smaller opening stocks).
Early indications suggest the US winter wheat area is likely to be down yet again in 2018 and autumn crop establishment conditions are not great (it is too early to make yield judgements but planted areas and write-offs might have a small impact on cropsize). A smaller US wheat area would mean the third consecutive area decline. Also, it follows a massive switch away from wheat in the US last season and a halving of its area since it peaked in the early 1980’s as the chart shows. This can only be bullish for our new crop values but is also fueled by the fact that other countries are fulfilling the demand.
Soybean stocks at the end of the 2017/18 seasons are seen by the IGC as rising, by 2Mt, to 41Mt, largely from slippage in usage figures. Markets have been relatively quiet with little market movement (as per the grains). The next big opportunity for large price movements will probably be in the spring when the spring crop area is established (in the UK, EU and elsewhere).
UK malting barley premiums remain firm, especially for pre-Christmas, as sellers have dried up. However, supply and demands remain tight for the season so opportunities for post-Christmas sales are still good.
Demand for pulses is nearly over pre-Christmas and relatively quiet for the New Year too. The Southern Hemisphere (Australia in particular) will be starting harvest soon into January so the UK will then have to focus in its competitive advantage of distance to the major markets of North Africa.
US WHEAT PLANTINGS: 1980 to 2017 – Source: USDA
