Oil price drop and currency knock £14/t off OSR prices

Coronavirus is having a growing effect on markets as economic activity slows in more countries.

Oilseed rape prices fell £14/t in the week to Wednesday (11 March), to average £309/t spot ex-farm.This followed an oil price crash on Monday, with a slight recovery to put Brent crude at just under US$36 a barrel midweek – about 30% lower on the week.

Ex-farm rapeseed values ranged from £304-£313/t midweek for spot sales, with firm meal prices helping to hold values higher than they would otherwise have been.

The oil crash also brought down the value of the US dollar, in turn helping push down imported feed ingredient prices.

Chicago soya bean futures hit a 10-month low on Monday, and almost all of the main ingredients are down in price on a week ago.

Spot feed wheat lost about £1/t in value over the week, ranging from £138-£150/t ex-farm across the regions and averaging £145.50/t as Farmers Weekly went to press on Wednesday.

Feed barley was also about £1/t down on the week, at an average of £122.23/t ex-farm and ranging from £119-£127/t spot.

Trade has been thin, as both growers and consumers step back from the market and weigh the twin implications of coronavirus and the lack of drilling progress.

Trade estimates now put the size of the UK 2020 wheat crop at just 10.5m to 11m tonnes.

Milling premiums rise again

With drilling still so far behind, fears about quality and supply continue to push up milling wheat premiums. Prices gathered by Farmers Weekly show full-spec breadmaking premium midweek averaging just over £20/t for spot movement.

The average old-crop premium has risen by almost £5/t in five weeks, while new-crop premiums are even higher.

“You could make £25-plus,” said Saxon Agriculture grain director Mark Smith. “But given the small area and the condition of wheat, understandably, nobody is prepared to sell and there’s a bit of a stand-off.”

New-crop milling premiums will be capped by Germany’s ability to supply milling wheat to the UK, according to traders.

Currency volatility factor

Currency has been a huge factor in price movements. A week ago, sterling was at a four-and-a-half month low against the euro.

Monday saw a big fall in the value of the US dollar, while on Tuesday the Russian rouble hit its lowest value against the dollar since 2016.

Tuesday saw falls in sterling and the euro against the dollar, while Wednesday’s Bank of England surprise interest rate cut pushed the pound down again.

Oil price fall has wider implications

While the oil price drop brings a welcome reduction in farm fuel costs, there is widespread concern about the potential for further economic shocks that could result from it.

For example, the fall has brought into sharper focus the huge short-term debt burden of US shale gas and oil producers, and the potential effect defaults in this sector could have on the wider global economy.

See also: Guide to claiming tax relief on energy efficient kit

Milling wheat premiums continue to rise

Date

Full spec milling premium (£/t)

5 February

16.40

12 February

17.90

19 February

19.80

26 February

19.70

4 March

20.10

11 March

20.08

Source: Farmers Weekly regional grain prices

DECEMBER
2

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