August Arable Update

Over the last 2 months we have suggested the new crop grain was worth selling. The feed wheat market has since fallen by £20/tonne. Traders continue to be focussed on the bears in the marketplace for the following reasons;

• The newly harvested global wheat tonnage is up 33 million tonnes on last year.
• The expected global coarse grains crop is up by 83 million tonnes on last year.
• The subsequent increase in total global grain stocks is 33 million tonnes, and in particular in the exporting regions.
• The Former Soviet Union is expecting a substantially higher wheat (and all grain) exportable surplus increasing by 11 million tonnes (and 17 million if you include coarse grains).
• The EU wheat harvest estimate is considerably greater than 2012, up by 8 million tonnes to 141 million tonnes.
• The UK carry over stock appears to be considerably higher than last year although the actual data is as yet provisional and there are disparities in various estimates.
• The UK 2013 crop could turn out to be better than expected in the light of the large areas of spring crops that were planted and the good ripening weather most of the UK had.
• The UK remains overpriced against other exporting nations, with imports remaining competitive into some UK port locations.

 However, there could be reason for the bulls to enter the arena this month for some other reasons:

• Half the EU wheat crop increase is instantly offset by starting the year with 4 million tonnes less stock.
• The rise of global wheat harvested is expected to stimulate additional consumption and the overall difference is only likely to offset the fall in stocks last year. In other words, global wheat stocks are barely changing.
• The 27 million tonne rise of global maize pushes stocks to 148 million tonnes, still less than 2 months’ supply (16% of the year) and remaining fairly tight.

 On balance we still see current prices as an opportunity to sell. The average farmer, whilst probably having less problem than usual with grain storage, could have cash flow issues, although, they are not yet apparent on a large scale.

Some crop prices this year could easily stray from the usual price matrix relationship simply because of the tonnage harvested. Oats is one case of this, with some expecting a 40% increase in crop size which one would expect would depress prices. However they are currently difficult to source so are relatively well valued.

Barley is also facing an unusual marketing year. The abundance of spring crops, much of which is indicating a reasonable yield and low nitrogen test, means the interest in winter barley as a malting option is slim. Malting premiums are tight. However those who traditionally plant malting springs, might find that, notwithstanding the larger area this category of farmers might have drilled, several crops on heavier soils don’t get the nitrogen levels required.

Growers with (spring) beans might also consider the possible impact of a large crop (which appears to be harvesting well so far). The additional effect of political troubles in Egypt (our primary buyer) could also impact on the bean market. Those planning to hold onto them to after Christmas should keep an eye on these factors.

Oilseed rape harvest is slow in the UK but almost completed elsewhere in Europe. Most are content with their yields under the circumstances but it is too early to judge for sure. The US soybean market dominates price movements (as usual) as traders become nervous about weather changes in the final weeks before harvest.