January Crop News

The USDA has changed the timing of its regular releases, most of which will now be released on a Friday at noon, Chicago time.  This means that Europe has but an hour to act on the information before their Futures markets close for the weekend.  It will not affect the long term value of grain but could reduce the opportunity for EU and UK companies to react to the information.

DEFRA data released this month showed that the grain usage for animal feed in the autumn increased by 2.8% compared with last year.  This surprised the grain trade, as it would expect the current high grain prices to subdue this sort of demand.  However, with the awful forage-making conditions last summer, many livestock farmers need additional concentrate feed to top up the energy the silage does not offer.  We also have to note that DEFRA deals in tonnes of grain at a standard dry matter rather than tonnes of protein or amount of energy.  It is likely that, in order to extract the same level of metabolisable energy as usual, compounders have to buy more grain than in ‘normal’ years simply because it is poorer quality.

Exchange rates since July have taken a change of direction in favour of the farmer and exporting businesses (see article in General/Policy above).  To import a tonne of wheat from the EU for €250 would now cost about £25 per tonne more than five months ago.  Likewise, European buyers would have to spend about €30 per tonne less on a tonne of UK wheat than last July, simply because of currency movements.  This has enabled our market to rally.  Indeed it has continued to do so and, despite the exchange rate movements, UK grain still remains dearer than similar quality grain in Europe.  This would be very bearish if the UK had much to export.  However, whilst there will be pockets of particular qualities and specifications in surplus, being short means that our grain price is migrating towards the import parity (the price that it costs to buy EU grain and ship it here).