Recently in Wheat prices Category

Steps taken to reduce the powers of the Canadian Wheat Board should not affect farmers in the UK, according to the HGCA.

The Canadian Wheat Board has been the sole buyer of grain in western Canada since 1935, but a recent court ruling means that the board could be stripped of its control to allow for competition.

“It is possible that we’ll see more Canadian grain on the global market, but I can’t imagine it will have a huge effect on the UK,” said Jack Watts from the HGCA.

Buoyant grain markets have helped grain trader Wessex Grain make record annual profits in the year to 31 July 2011.

The company made an operating profit of £427,127 on turnover of nearly £56m, significantly up on the £41m the previous year.

“Not only were the markets buoyant, with feed wheat prices increasing by £80/t from the market lows, but for significant periods, the market followed clear trends which the company took advantage of,” managing director Simon Wilcox said.

The business opened its expanded Henstridge store in July, providing space for an extra 20,000t of grain and boosting overall capacity to around 70,000t.

Oilseed rape could be a more profitable crop than wheat next harvest, according to the latest edition of the industry bible, The John Nix Farm Management Pocketbook.

The latest (42nd) edition has just been published and suggests that in terms of gross margin, osr could outstrip wheat as the highest broad-acre combinable crop for the first time in 20 years.

There’s some welcome news for livestock farmers too, as the new edition says beef and sheep gross margins also offer “greater opportunities for profitability than for many years” on the back of price increases.

The outlook for poultry is less optimistic though, as the most intensively farmed caged egg chickens are budgeted a negative gross margin per bird, even before overheads are included.

FW has been hearing of some impressive rapeseed yields this season, despite the Spring's drought. One farming contributor in the office this week reports nearly 5t/ha in southern Oxfordshire (although he was less keen to talk about his barley).  But what remains to be seen is how much we have as a nation to export, and how this gross tonnage will influence prices. There are several ways the industry collects this information and the NFU is urging members in England and Wales to complete its harvest survey.
Chief arable adviser Guy Gagen said: “Historically, the harvest survey has proven to be a reliable estimate and provides the most accurate early forecast for UK crop yields and production levels. To ensure it is comprehensive it is vital that as many farmers as possible take part. The data gathered supports the results of DEFRA’s own survey later in the autumn and fills an important gap between harvest and when official estimates are available."

 

Animal feed use and human consumption of cereals in the EU will grow only slightly this decade but overall use is forecast to rise by about 9%.

This will take total consumption from 276m tonnes to almost 301m tonnes by 2020, with production rising at around 6% over the same period from 294.2m tonnes to 312.9m tonnes.

“Demand for cereals within the EU is being driven by a growing biofuels sector,” says HGCA’s Sarah Nightingale.

“While official targets have been set for renewable fuels, the sector has been affected by third country competition and the high price for raw materials this season. Over the next 10 years, cereal demand by this sector is expected to more than double.”

 

Long term prospects for UK cereals growers are still positive but higher input prices and the effects of drought may put short term pressure on cashflows, warned Lloyds TSB’s agriculture director Gareth Oakley at last week’s Cereals event.

He called on farmers to discuss requirements with their bank manager sooner rather than later. “There may be particular problems for growers who committed to sell large volumes of their crops forward. If they do not grow enough grain then they may be forced to buy in expensive stocks to cover their commitments.”

Short term issues could be addressed either by early discussions with cereal buyers to agree a strategy to deal with any problems or managed through cash flow if banks were involved early enough and understood that an action plan was in place.

In a market that moves on every bit of news, the discovery of a locust problem in southern Russia might have been expected to push prices up by more than the £1.25/t rise seen by mid day Wednesday on London’s feed wheat futures market.

France and Kiev based analyst Agritel reports that more than 77,000ha (190,000 acres) have been treated with pesticides but that the Department of Agriculture considered that this measure was not sufficient.

Meanwhile the Ukrainian 2011/12 grain export forecast has been cut to between 15m and 18m tonnes, from the previous figure of 19m to 20m tonnes. The latest Russian crop forecast from Russian Grain Union sees a 2011/12 grain crop of 80 to 93m tonnes, leaving the door open for those exports but still all weather dependent.

“With the major five exporters (US, Argentina, Australia, Canada and EU) holding only 44m tonnes of wheat, or 24% of the total stock, the world needs all of the total export potential from the Former Soviet Union (26.3m tonnes), and any signs of export restrictions from this region will ignite further buying speculation,” says Gleadell managing director David Sheppard in his Cereals event market report.

 

Weather problems and changes in consumption of wheat could see the coming grain year end with stocks at considerably lower levels than official estimates have so far put them.

US Wheat Associates President Alan Tracy stressed to those at the International Grains Council’s annual conference in London that his figures were possible rather than predicted but that end of season world wheat stocks in 2011/12 could drop to 162m tonnes, which is about 20m tonnes lower than the latest USDA and IGC forecasts. 

Lower production accounts for most of this but wheat use may also be several millions tonnes higher than previously forecast.

US corn (maize) stocks could fall to just 11m tonnes, which would leave the all important ‘stocks to use’ ratio at just 3.4%, or lower than two weeks’ supply. 

 

As the debate about whether speculators are fuelling volatility in futures markets rumbles on, it was interesting to hear from someone at the forefront of it all this week.

NYSE Liffe’s Peter Blogg told the DairyUK-DairyCo conference that, contrary to media headlines, futures markets were fundamentally driven by physical grain trading, rather than money-grabbing speculators.

He reckoned 80% of the soft agricultural commodities futures and options business was from those involved in physical markets, such as producer co-ops, food and feed manufacturers. While investors such as hedge or pension funds were not handling physical product, they were essential to add liquidity in futures markets, he said.

This liquidity was something that was still lacking from the Skimmed Milk Powder futures contract launched last year, with limited interest so far. “It’s been a pretty slow start, but I expect interest will grow over time, especially as more people become familiar with, and use, other futures contracts, such as feed wheat.”

The HGCA has published an interesting prediction of arable incomes this season, showing the impact of higher grain prices, but also the potential losses if there is a big drop in yields.

Its hypothetical 100ha model estimates income for the 2011/12 season will be £50,738/100ha, well up from the £39,088/100ha in 2010/11. The prediction is based on an indicative ex-farm feed wheat price of £166/t, barley at £156/t and oilseed rape at £380/t. Average wheat yield is put at 8.07t/ha.

But the HGCA acknowledges the recent dry weather is causing concern over crop condition and suggests a 20% yield reduction would knock almost £23k off the income estimate. If ever there was a year for adopting risk management when marketing grain, this is surely it.