Bumper world crops could challenge grain and oilseed prices in the new year despite strong global demand.
Canada has record wheat, soya bean and rapeseed crops to move while the US Department of Agriculture’s recent world supply-and-demand figures forecast a rise in production and end-of-season stocks for all the main grains (see table).
The EU is exporting wheat at a good rate, although US and Canadian exports are not as high as expected and as a result the HGCA expects competition on world markets to increase.
Grain market factors
- High EU wheat exports
- UK continues to import high volume of wheat
- US wheat exports lower than expected
- Russia has planted a lower winter wheat area of 12.2m hectares while its spring area is expected to rise by 1.6% to 13m hectares
UK ex-farm prices have continued their relatively steady path in recent weeks, although tending slightly weaker. However, local supply issues are reflected in the wide price variation around the regions, with spot prices ranging from £155/t across southern England to £170/t ex-farm in the Scottish Borders.
Despite a much better quality crop and to the surprise of many, wheat imports to the UK continue at a high rate, although price competition means some of this is likely to be replaced with maize.
Demand for maize to go into US ethanol production is expected to increase because of competitive prices. Longer term, US political pressure may reduce the minimum level at which bioethanol must be included in fuel.
The UK exported more than 200,000t of barley in October, the highest monthly total since August 2002. Exports for the season so far are more than double the same time last year at 458,000t.
World cereal and protein production and forecast (m tonnes)
However, the surplus generated by the largest barley harvest in 15 years means this pace must continue to avoid heavy end-season stocks, warned the HGCA in its market report.
“With southern hemisphere grain now available, the competition is tougher. It is unlikely the rapid pace will be sustained, resulting in higher carry over stocks.”
Spot barley trade this week was in a much smaller range than that for wheat, from £133-136/t ex-farm.
Oilseed markets have been helped by strong demand – the US expects to export a record 26m tonnes of soya beans to China between September 2013 and August 2014.
Global grain price rise could be short term