Februrary Arable Market

Customs data shows UK wheat imports since the start of the grain marketing year (1^st July) far ahead of exports.  1.342 million tonnes were imported versus 512,000 tonnes exported giving a net trade position of 830,000 tonnes imported.  Exports are about a third of those by this time last year and imports are about three times last year’s figure.  Last month’s Bulletin set out how the net trade position could well be even more extreme next year as the biofuel plants accelerate up to speed in the North East of England and the wheat crop harvested this coming year will be even smaller.  

Due to the extremely low quality of some of the 2012 crop, a number of farmers are having real difficulty selling it.  Whilst the old crop price is higher than the new crop price, it is still thought likely that many farmers will carry a tonnage over into the new crop marketing/movement period despite the shortage of grain and high prices.  We also notice that barley exports are down on last year (309,000 against 522,000t) and maize imports are up substantially. It appears that these imports are being used in the new biofuel plants. (We did question whether the plants would be able to process other grains if the economics favoured them, and this seems to be confirmed already).  The increase in imports is coming from various countries, primarily Germany, Estonia, Denmark and Poland.

Various rumours that China is about to enter into the wheat market with a shopping list of a million tonnes of wheat has rallied the prices a little this month.  However, the market is becoming a little tired of such rumours in recent years, often with little actual trade to substantiate the hearsay.  Indeed, the wheat market has gradually slipped to 5-month lows in the UK and greater falls elsewhere.  Much of the value in the UK wheat market has only been retained because the Pound has weakened to €1.15 (86.5p/€) – representing a 6% fall since the start of the year (equivalent to £12.65 of support on headline Futures prices).

Some forecasters have updated their ‘growing’ crop expectations, with Strategie Grains one of the most recent.  Their predictions for the UK crops show a fall of all-wheat crop to 12.4 million tonnes, down from 13.32mt last year and 15.25mt in 2011.  This is still assuming a yield of 7.48t/Ha, not far off the 5-year trend yield and substantially higher than last year’s 6.66t/Ha.  Other forecasters are pitching their figures lower than this (including us) based on a poorer yield.

Also though, Strategie Grains is raising its barley crop expectation by increasing its spring crop area to 830,000 hectares (up from 620,000 last year).  This would, they say give a barley total tonnage of 6.7 million tonnes; over 1.2 million tonnes more than last year.  We can imagine what might be inclined to happen to the barley/wheat spread if they are correct, and barely is trading well below wheat prices already this year.  Of course, so much will depend on the condition of the land and weather in the coming 6 or so weeks.