February Arable Review

The global cereals market is still lacklustre despite grain prices moving up a little this month.  Prices remain within the range set so far this season.  There is not much unsold old crop remaining on farm now, so at this time of year attention turns to new crop.  Indeed, throughout the world, as autumn planted crops start to emerge from winter, and spring drillings are planned, the markets are often influenced more by the forthcoming crop than current supply and demand fundamentals.

The US futures markets moved last week following a USDA conference where new crop maize planted areas and yields were discussed.  This included forecasts of record crops, high yields and the rest.  We should bear in mind though that the crop is a month or more from even being drilled yet to forecasting output at this stage is littlemore than trend-analysis.

The Ukrainian currency has fallen sharply in February, arguably favouring their exports, but the protests have caused logistical problems too and it seems exports have slowed.  We must remember that any surplus they have will surely come out eventually, possibly affecting the market later in the year.  However, reports also suggest that supplies for spring crops are not getting through fully either so cultivations could end up being hampered too.

The domestic market, as demonstrated by the chart has remained all season within a relatively tight range of about £15 per contract. Over the same period of time, the Pound has gradually gained ground over the Euro, effectively reducing the value of UK commodities.  For wheat this is to the tune of £8 per tonne; in other words accounting for about half of the market movement.  Much of the other movement is currently attributed to technicalities such as charting and speculation.

UK barley is being shipped away at quite a clip this year, with 770,000 tonnes recorded to the end of December.  This is double last year’s total exports and about as much as year-end trade for the previous few years.  However, with a crop larger than for the previous 15 years, and over 1.1 million tonnes larger at that, the trade needs to be brisk.  At this pace, there is actually a risk that there will be a relatively large carry over at harvest 2014.  This would clearly not be good for farm prices for the new crop either.  Pulses remain buoyant with prices gradually rising from their ‘normal’ position in the combinable crop matrix.  This is pushing pulses into a position to challenge oilseed rape as the highest break crop gross margin on many farms if they remain firm.  This combination of factors could have an impact on spring drilling decisions which are just round the corner.