June Grains Update

Old Crop

The end of June marks the end of the nationally recorded grain marketing campaign.  There is some old crop still on farm and in pipeline stocks, but this will now register as being carried over into the 2014/15 campaign season.

Data shows that to the end of April, 380,000 tonnes of wheat had been exported from the UK from the 2013 harvest.  This is down from 614,000 tonnes by that point last year and 2.375 million by April 2012.  On the import side, by April this year, we had imported almost 1.8 million tonnes of wheat, which compares with 2.3 million this time last year and 731,000 in 2012.  DEFRA’s projections are for another 70,000 tonnes of wheat exports to have taken place to the end of June, making total exports of 450,000 and imports of 1.93 million.  This gives a net trade of about 1.5 million tonnes imported.  This is substantially less than the net imports from last year of about 2.2 million tonnes because of a higher carry over into this year and a lower level of usage for animal feed (higher prices and better grass growing conditions).  Barley imports are a fraction of normal levels at an estimated 88,000 tonnes compared with 235,000 last year and exports of 1.25 million tonnes compared with a third of a million last year.

New Crop

Quiet markets tend to be bearish, especially when the main news is about large US crops and increased global harvest projections.  The start of the new export season is very quiet with UK grains overpriced against Eurozone competitors by a few Euros.  This implies some downside to the domestic market as we enter the harvesting period.

The International Grains Council (IGC) published its most recent update on its global harvest expectations for 2014 last week.  It increased its crop forecast for all grains by 12 million tonnes (5mt of wheat and 8mt of feed grains); a considerable rise.  This pushes the global stocks position of both wheat and coarse grains upwards.  We need to be aware that just because the price of grains has fallen over the spring, it doesn’t mean it won’t fall further.  A farmer knowing his or her cost of production is important but, in a bearish market, it might still be best to sell at a ‘low’ price.  We really don’t know where prices will end up, but currently, there is ample grain in the world, and buyers know that.

Whilst little is said by the IGC this month about the oilseed market, the brief comment is hard hitting:  “While projections for 2014/15 remain tentative, potentially large outturns in the three major soy bean exporters could boost end-season stocks by 24% y/y. Trade is likely to rise, albeit at a slower pace compared to the recent average.“

This goes a long way to explaining what has happened to the oilseed rape market in recent weeks.  Demand for oilseeds remains firm but the supply is also adequate, currently keeping prices depressed.

Pulses throughout the UK are mostly looking well and podding-up nicely.  The market is quiet with buyers sitting quietly waiting for harvest, and farmers holding tight with few sales ahead of harvest because of the notoriously high volatility in yield performance in pulses.

For the 2015 harvest, barley and pulse traders are becoming excited about the prospect of higher spring crop areas to help fit in with the new CAP regulations.