Grain markets nervous on Ensus closure and crop outlook

A nervous wheat market is weighing the impact of the closure of the Ensus bioethanol plant, along with higher than expected US crop and stock figures.

The news that Ensus is to close its Teesside plant for a third time since opening in 2010 and for an indefinite period, saw UK wheat futures fall by more than £4/t on Tuesday. This put the November 2013 contract at £181.40/t.

By midweek it had recovered to £184/t with the old crop wheat market looking set to remain nervous, balancing the likely size of potential carryover against the increasing odds of a late start to harvest which will boost old crop demand.

Although the poor quality of the 2012 UK wheat harvest means we will import twice as much grain as normal this season, the length of the winter and poor fodder quality have raised demand for feed grains.

However, Gary Bright, managing director of GrainCo, said there was still plenty of low quality wheat left across the UK, which could now be more difficult to find a home for. “There are barnfuls of poor quality grain out there,” he said. “There has been a little bit of export in the past couple of weeks to Germany and Spain, but most EU destinations want 68kg/hl, which could be difficult to meet. Ensus has been a godsend for farmers and the trade this year, so we hope very much that the shutdown is temporary.”

Prospects for new crop remain uncertain, with no-one in the trade expecting a UK wheat crop of much more than 12m tonnes against a more common 14-15m tonne crop.

“There has been a little bit of export in the past couple of weeks to Germany and Spain, but most EU destinations want 68kg/hl, which could be difficult to meet. Ensus has been a godsend for farmers and the trade this year, so we hope very much that the shutdown is temporary.”
Gary Bright, managing director of GrainCo

The release of a US Department of Agriculture report just before Easter had been expected to show a drop in corn and wheat stocks. Instead, the report recorded a relatively large increase mainly due to lower demand for cattle feed grains, subdued ethanol demand and an update which increased the size of the 2012 harvest.

The USDA figures pushed maize prices down by more than 12% over two days, with wheat also taking a 10% hit and European markets following this trend although to a lesser degree. Anticipating a fall in corn stocks, speculators had taken large positions on US futures markets which they then liquidated, causing the drop in prices.

Across the EU, total grain production is expected to rise to 278.5m tonnes in 2012-13, a rise of just 1.9% on 2012-13.

The 27 EU member states are expected to produce 127m tonnes of soft wheat this year, 3.7% more than from the 2012 harvest, with poor weather expected to have a serious impact on yields, warned grower and co-operative group Copa-Cogeca.

The oilseeds market continues to firm on concerns over crop prospects driving this. With many crops under question, final acreages are difficult to call. Low temperatures mean frost kill is a serious threat in some countries while excessive rainfall in southern Europe is delaying sunflower planting.

Oilseeds production across the EU is expected to recover this season, rising by 8.5% but the EU remains the biggest importer of rapeseed.

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