December Arable Update

Here is a chart showing the movement of wheat price for 2014 and 2015 harvests for delivery next month (January 2015) and November 2015 for new crop. It identifies that prices have indeed fallen over the year, for old crop from about £155/tonne to about £130/tonne (these are Futures prices so take a delivery charge off this to reach an ex-farm price), and from about £155/tonne to £140/ tonne for new crop wheat.

We note how things changed fairly sharply at the end of September. Trawling back through the various trader’s weekly emails that week, there was little mention of Russia, exchange rates or decreased harvest surpluses, rather a change of trading strategy amongst the institutional commodity investors, such as pension-fund managers and speculators (often of other people’s money). Since then, there have indeed been other pieces of bullish information arrive on the news-wires, but there always are, and bearish information too. It is not clear just how much of an impact the speculators have played in this market reversal. Currency (pound vs. euro) has not moved much since June, (less than 2%), and the Northern hemisphere harvest was indeed just as large as many grain analysts expected. Russia has probably provided the largest additional bullish news, effectively closing all grain exports from Russia for at least the rest of this marketing year. However, some consider that the lions-share of grain exports from Russia have already been exported and the loss to the global marketplace will be less than 9 million tonnes, a volume that can be easily accommodated this year. Indeed, Russian barley exports to Saudi Arabia were forecast to exceed a million tonnes. Cancelling that would be very useful for UK barley exporters having about that much more than usual to export this year. Nobody is going to run short. In fact the only political reason for cancelling exports from Russia is to ensure domestic supply remains plentiful, running out of food would cause riots for President Putin to deal with.

Beans have had a good start to their marketing season, with exports to Egypt building on previous years’ successes. Indeed, it is thought that supplies for export might be running low soon. Egyptian bean buyers clearly prefer UK beans to those from France or Australia (the other two exporters). A higher crop area in 2015 might be well timed for a strong export campaign next year.

There is little major news in the oilseeds complex, as prices are buoyed by European demand from the crushers and for biofuels but pressured by falling crude values, and lower requirements globally because of large soybean stocks. There istalk of large South American harvests although most are not even planted yet to its early days yet. Over the year, UK oilseed rape prices have moved by over £100 per tonne, peaking in the spring, then falling to their lowest point as the new crop became available in July. It has since recovered by £30 per tonne, but the 2014/15 crop year is clearly rather different in terms of global availability of oils. However, the gradual price trend since July has been positive.