Grain prices fall in a complex market

UK feed wheat and feed barley prices have fallen further in a complex market influenced by Brexit, the US-China trade issue and uncertainty over crop sizes.

Feed wheat prices were down by £2-£3/t on the week, to average £165.5/t ex-farm as Farmers Weekly went to press on Wednesday (22 February).

A wide regional range continues, with feed wheat at anywhere between £155/t and £172/t spot.

See also: Russian dominance over world wheat markets slows

Feed barley has fallen more than wheat, having been overcooked earlier in the season when it was trading at parity with wheat in some regions.

The wheat-barley gap is now as wide as it has been since harvest, at more than £20/t.

Feed barley prices are in a wider range than wheat, from £129/t to £160/t.

The most recent price falls were prompted by aggressive and successful French wheat export bids, which the trade took as a signal that the country has far more to export than previously thought.

Futures markets

Futures markets around the word tumbled as a result, having already lost ground a few days earlier when the US market fell on poor US grain export statistics and the possibility of further US sanctions against Russia.

The big discount into new-crop prices offers little incentive to hold old-crop, says the AHDB, advice which is echoed by many traders.

With reduced EU exports leading to higher-than-anticipated theoretical stock levels, and lack of incentive to hold wheat, the bearish outlook for the remainder of the season could very well continue, said AHDB.

At farmer-owned co-op GrainCo, domestic grain manager Jonathan Pearse said the French sale had spooked the market, which was generally still very quiet.

“The market is very hard to call, at the moment it’s all doom and gloom and drift, but I’d be surprised if it stays like that for months,” he said.

Another trader pointed to the complexity of this season’s market in terms of predicting the path of wheat values.

“It’s not just about wheat and its potential tightness,” he said.

“There’s a lump of cheap maize available, barley is dropping to make it cheap enough for compounders to reformulate their rations and the ethanol plants are not working.

“On top of that, we could end up with no deal.”

New-crop

Whether old-crop prices will fall to meet new-crop value, currently about £20/t lower, or new-crop will rise, is uncertain.

A late harvest could see wheat stocks stretched and both sets of prices move to converge.

The November 2019 London feed wheat futures price was at just over £149/t midweek, having lost £16/t since mid-December.

New-crop values continue to reflect a wide range of regional variation, with harvest wheat worth £135-£140/t ex-farm and barley £120-£125/t.

With new-crop wheat areas higher for 2019 (except in the US), only a big weather issue would push up global prices significantly, say traders.

Grain market background

  • Post-29 March UK grain trade, especially on the export front, is exceptionally quiet because of Brexit uncertainty.
  • While demand has not necessarily fallen, trade has been curtailed and in many cases (malting barley exports) lost.
  • The UK market is still trying to assess the reliability of BPS and census crop area data, which are in conflict – if the lower BPS figure is correct, this could support domestic prices.
  • UK ethanol plant closures have pushed down demand for wheat, but UK grain use for animal feed (wheat and maize) is high because of the dry summer and poor forage stocks, while barley use in feed fell 13% last year.
  • End-of-season stocks among the world’s major wheat exporters is forecast at just  14.7% of annual consumption and the lowest since 2013-14. This could restrict the extent to which prices will fall.
  • The UK imported almost 1.3m tonnes of maize between July and December 2018, up about 300,000t on the year. Wheat imports reached 1.17m tonnes during the same period, 403,00t more than in the same period of 2017.
  • The US winter wheat area is forecast to fall by 4% next season to its lowest for more than 100 years, so increasing new-crop price sensitivity to weather stories.

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