Market pressure continues on big crop outlook

Grain and oilseed markets have fallen further on continued expectations of big crops.

Ports are loading oilseed rape and barley boats but traders are finding it difficult to place new wheat and barley supplies as sterling remains strong and availability high.

“Farmers are avoiding putting a price on grain wherever possible,” said Gleadell’s Jonathan Lane.

See also: OSR yields disappoint

While farmer retention of grain was higher than ever, prices had still fallen. “It’s the bigger picture that’s undermining prices,” he said.

Factors affecting grain markets

  • Expectation of heavy crops and strong sterling pushing prices down
  • Politics are making markets nervous, while quality questions are pushing up milling wheat premiums
  • US wheat supplies are forecast 9.1% lower, as the impact of drought shows in the yield of some wheats and a lower acreage of others takes the crop forecast to its lowest level since 2006-07
  • US wheat exports are forecast to fall from 32.2m tonnes in 2013-14 to 24.5m tonnes in 2014-15
  • Total Canadian crop production is forecast to fall in 2014-15 by almost 20% to 77.8m tonnes, as grain and oilseed yields return to more normal levels
  • Increase in the forecast for the Russian grain harvest to 100m tonnes has added pressure

The HGCA reported that across Europe, forward sales by growers were at about half the usual level because of grower reluctance to accept low prices. However, cheaper wheat is expected to tempt the UK’s bioethanol producers to use more UK grain this season.

Vivergo is operating exclusively on UK wheat and expects to reach full-scale production at its Hull plant by the end of this year. This would require an annual purchase of 1.1m tonnes of wheat.

While continued downward price pressure has taken some contracts to four-year lows, political tensions following the Malaysian airliner crash in Ukraine and questions over wheat quality mean that markets are also nervous. The day of the crash saw futures prices gain £3-4/t, followed by a fall of almost the same proportion the next day.

Summer rainstorms have put French milling wheat quality at question, in turn depressing the feed wheat market by adding to an already heavy crop.

The extent of the French problem would be clearer in a week or so, once the outcome of the northern wheat harvest was known, said Mr Lane.

Driven by tight supplies, old crop milling wheat premiums reached an average of £63/t for full-spec breadmaking wheat last week.

As Farmers Weekly went to press on Wednesday, its regional spread of ex-farm grain prices for August stood at £105-118/t for feed wheat, with full spec breadmaking wheat at a premium of between £28/t and £35/t.

Feed barley was at £95-103/t ex-farm, with good yields being reported in general. Specific weights were higher than average, said Openfield’s Alec Tindal, including a report of one sample at 76kg/hl.