Get on and sell

The hoped for ‘planting window’ in January and first half of February remained shut. Recent storms mean it will be weeks before any ground will be dry enough to do anything with. Yes, in the chalky lighter land, drilling of winter wheat and spring barley has been going on; but in the heavier areas some have now resigned themselves to fallowing. The UK, coupled with strong currency, is not cheap enough to make new export sales but we have continued to execute old shipping business. By the end of January over 1 million tonnes of wheat and 1.3 million tonnes of barley will have been exported.

France is the cheapest wheat in the world just now. Despite its long labour strike it has captured most of the recent big wheat tenders particularly to North Africa and more surprisingly a million tonnes to China! Even though we are too expensive to export: the UK old crop wheat market has remained firm, for now. As I said last month we have enjoyed a £30 increase since September – which is not bad – when you consider it was the second largest UK crop ever! Some of that is due to farmer retention; understandable to a point, when looking at the lack of wheat plantings in some areas. Certainly since last November we have had growers declaring their intention to hold over old crop wheat – utilising the barn space – not required, because of lack of wheat plantings. That tactic is more difficult to sustain now. Firstly, because the old crop has risen and secondly the carry (today only £8 per tonne) is not sufficient to cover the real cost of finance, weight loss and so on, quite apart from the practical inconvenience. So I think very few will actually carry wheat into new crop. Neither do I think merchants will either. Don’t forget there remains a cap to the new crop wheat market. September wheat can be imported to the UK at £157, if you have a registered dock side store it could be sold on the November futures market – for say a £5 on cost – so that will limit the upside. Of course this could change if currency moves or there is a crop disaster somewhere but shipping freight rates have collapsed making it easier to move grain cheaply. So all this has implications for our old crop market with timing of wheat sales being critical. Apart from France being much cheaper than the UK even Russia – who had been content to keep its home market artificially high – is now making discounted offers for all the big world wheat tenders that come up. By the way the grain market in Russia has reverted to state control again via a big bank. So they really can change policy and direction very quickly thus affecting the world market.

Just now the domestic grain market does not feel ‘heavy’ with supplies. Consumers have been content to buy whatever they need short term. That could change if growers decide to cash in their remaining wheat – rather than carry it forward. The UK balance sheet reckons there could still be 1.2 million tonnes of wheat to be disposed of before harvest and it’s too expensive to be sold for export. Barley has a much smaller surplus – maybe 370,000 mt – to liquidate or use by harvest. Barley supply feels ‘tighter’ than wheat; but that has not stopped the discount to wheat being £20/£25 per tonne or indeed the malting premium disappearing altogether for southern barley.

So we are a month closer to something, but what? What has not changed is the record global stocks of wheat and maize. Also there is no material change to the weather in any major grain producing area in the world – it’s all very normal – even Russia has now had some winter weather at last! Sterling has strengthened, for no real reason, so that hinders exports, especially for oilseed rape. There are fresh updates due from the AHDB on plantings and also BPS figures due in February perhaps they will provide a clearer picture. In the meantime, if you are fortunate enough to have some old crop wheat to sell or have sufficient new crop established get on and sell some, while you can still achieve better prices than most of the rest of the world.