Arable Outlook- February

We have commented in previous months how there is lots of wheat and barley the in UK to export this year.  The following charts demonstrate the current progress in the 2014/2015 marketing year (i.e. the grain from the 2014 harvest). The double lines demonstrate how much grain has already been exported.  The vertical bars on the right demonstrate the range of exports needed if the year-end stock level is to end within the carry-over stock level of any year in the last decade.  Lastly, the horizontal dash in the bar demonstrates the amount of exports required to leave two months of stocks in store at the end of June; theend of the marketing year.

As can be seen for wheat, under the current trajectory, the wheat exports are just about likely to just hit the carry over stock level that we have reached over the previous decade with about 2 months of stocks by the end of June.  This covers the time it takes before the UK harvest starts flowing into mills and compounders’ facilities.  Stocks will still be high but not unheard of.

The rate of barley exports is slower as can be seen in the second chart. Under the current trajectory, at the year-end, there will be about 4 months of barley carry-over into the 2015 harvest. This is enough to depress the barley market next season.

The last two years have been small export years for both crops.  Indeed, the UK has been a net importer for two consecutive years for wheat.  Whilst this is not the case for barley, the UK has more barley exports to make than for any year since 1999.  The hill is a steep one to climb. In the face of this, the considerable strengthening of Sterling has made the export task more challenging to achieve.  At times in the last month, despite the surplus here in UK barns, it has been cheaper for some Northern English mills to import German wheat.

In simple terms, to become competitive with the rest of Europe and rekindle the export process, prices have to fall again or European prices have to rise.  It is worth thinking about the implications of the potential value of grain at harvest, especially for those who have to sell grain straight from the combine harvester.  The price of grain is not set according to your cost of production so today’s price bid for harvest might turn out to be the best there is.