Category: Arable

Grain Markets

Global Grains

Global grain markets are largely unchanged on the month.  There has been some short-term support, but there is a distinct lack of news to sustain any price increases.  Both the USDA and the International Grains Council (IGC) published their latest world grain and oilseed supply and demand estimate updates.  For grains, both organisations made downward revisions to global ending stocks, the USDA by 2Mt and the IGC by 6Mt.  In both cases the downward revisions come from reductions to maize stocks.  That said, the month-on-month reductions to the outlook are a drop in the ocean relative to the forecast 60 million tonnes of stocks.

With the US maize harvest 59% complete, the next important drivers for grain and oilseed markets are likely to come from the southern hemisphere.  The picture in Brazil is split, where excess rainfall in the south is delaying soyabean plantings, whilst more rainfall is needed in the north of the country.  If this continues it has the potential to support soyabean and so rapeseed prices.  Beyond this, attention will turn to South American maize planting.

UK Market Update

It’s been a challenging drilling window for many so far this year.  Whilst the autumn has been mild, the stop-start rains which prolonged harvest have continued.  Reports suggest that pest pressures are increased, particularly for oilseed rape with both flea-beetle and slugs a problem.  The relatively mild weather has seen widespread flea-beetle damage in rape crops further north than usual.  In addition, storm Babet left many fields, particularly in the Midlands, East Anglia and Scotland under water.

As with the global market, UK wheat prices are relatively unchanged month-on-month.  There are odd opportunities to benefit from short-term spikes.

The AHDB published its ‘Early’ Balance Sheet for the UK wheat and barley market.  For wheat, whilst the carry out stocks from last season are up significantly (9% year-on-year), AHDB estimates the 2023 wheat crop to be significantly smaller (14.1Mt).  This is due to a much smaller planted area than had been expected.  Consumption of wheat is also seen increasing, with both ethanol plants expected to remain operational.  There is also expected to be a switch from barley to wheat for some animal feed compounders.  With a smaller pig herd and poultry flock and reports of reasonable forage production for ruminants, there will be questions over the level of animal feed demand this season.

The UK wheat market is left in a broadly similar position as it was in the 2021/22 season. However, the lack of support in global markets and little domestic activity is keeping prices subdued.  Defra will provide another update on the size of the UK wheat crop in December.

For barley, large opening stocks and decline in animal feed demand are expected to outweigh the drop in production year-on-year.  As a result the UK is expected to have 1.5 million tonnes of barley which will either be held as stock or exported.  Small volumes are moving, but there are currently cheaper origins than the UK for barley.

Whilst feed markets may be under pressure, there continues to be strong premiums for milling wheat and malting barley.  Milling wheat premiums are in the region of £65 per tonne and malting barley premiums have reached as much as £85 per tonne.  The importance of knowing and maintaining the quality in the barn cannot be overstated this season.

Pulse prices have remained firm against other combinable crops, although there are suggestions that feed beans and peas may be displaced by cheaper protein sources into animal feed.  The trade expectation is that prices will fall.

Beet Price

British Sugar and the NFU have still not agreed a contract beet price for the 2024 crop.  They are now taking the matter to independent arbitration.  The Centre for Effective Dispute Resolution will assist the two parties to come to an agreement.

Spray & Seed Imports Extended

The Government has put in place measures to ensure imports of seeds and sprays from the EU can continue.  As we wrote in April (see https://abcbooks.co.uk/spray-import-ban/) the ‘parallel’ import of equivalent plant protection products (PPP) for the EU was banned as from the end of June.  Imports of seed treated with products approved for use in the EU (but not registered in the UK) were also due to cease at the end of this year.  This was going to be a particular problem for maize seed and some horticultural crops.  It has now been announced that Secondary legislation will be enacted to allow further temporary access to these products.  For treated seed, any product approved in the EU will be allowed to be imported to the UK until 1st July 2027.  This is to give manufacturers time to get products approved in the UK.  However, part of the issue is that the UK market is ‘too small’ for it to be worthwhile to go through the process.  It remains to be seen how this issue will be addressed in the long-term.  For PPP, there will be an extension of existing parallel spray permits until 31st December 2024.

Potato Markets

The resilience of the potato crop has shone through this season, with yields higher than might have been expected given one of the latest planting periods for many years.

Cold and wet conditions delayed spring drilling, with some growers not finishing until early June.  But since then, conditions have been favourable with a mix of sunshine and summer rain – there was twice as much rainfall as normal in July.  The crop was also able to withstand heatwaves in June and September, so overall yields are at least average for many and above average for some.

Better-than-hoped-for yields will not compensate for a decline in the area however.  It may have been down by as much as 10%, with a bigger drop in the packing potato area.  Overall GB plantings are likely to be 100,000 hectares or smaller – a record low.  The crop may struggle to get above 450,000 tonnes.

The small size of the crop is already apparent in higher prices, with values of between £250 and £450 per tonne for packing types, depending on variety and quality, according to the Potato Call newsletter.  Most bagged potatoes for the fish and chip trade are being sold for at least £250 per tonne.  Prices could increase further once harvest supplies ease and growers lock potatoes up in store.

The discovery of isolated cases of Colorado Beetle in Kent and Hampshire potato fields over the summer led the Canary Islands to suspend imports of all UK ware and seed potatoes.  That trade should be resuming soon after more checks and restrictions on what and how potatoes could be moved to the Islands were agreed between Defra, the Spanish and Canarian authorities.  The trade in ware and seed to the islands is worth more than £10 million a year.

A small increase in area and improvement in yield means there are more potatoes in Europe this year than last, but volumes are still below 2021 and 2020 levels.  Prices started the season at record highs of up to €500 per tonne for processing potatoes, but have plunged to €100 per tonne as harvest supplies have increased.  The expectation is values will rise later in the season.  In many cases, contract prices are 30% higher than last year, beginning at €175 per tonne and rising to €280 by June.

Demand for potato products around the world remains strong despite some recent buyer resistance to high prices.  This includes record imports of frozen chips into the UK, which rose by almost 60% in the year to July to £919 million.

Expansion of the potato crop in 2024 could be held back by a lack of seed.  The area is estimated to have declined by 7% in key seed potato areas including the Netherlands and Scotland; European association Europatat has urged buyers to accept larger seed sizes to ensure they have the seed they need.

 

 

Sugar Contract 2024

British Sugar has announced that the minimum beet price for 2024 will be £37.50 per tonne.  However, this is not an agreed figure with the NFU under the IPA, as negotiations have failed to produce a price so far.  British Sugar (BS) is likely to be keen to get a price out into the sector ahead of autumn plantings.

The price compares with £40 per tonne for last season.  BS argues that production costs have fallen as has the price of alternative crops such as cereals or oilseed rape.  The NFU has pointed to the current strength of the sugar market and the fact that many costs are still elevated.

BS has stated that it will offer a ‘market-linked bonus’ for the 2024 crop.  This would take the price of beet above £40 per tonne if the sugar market remains at current levels.  The yield protection option and contracting part of production under a futures-linked price will also be continued from the 2023 contract.

BS and the NFU are continuing to negotiate.

Oats Herbicides

Oats growers may find their armoury to control grassweeds diminshed this season.  Previously, an Extension of Authorisation for Minor Use (EAMU) was available on the crop for diflufenican.  This includes both the straight product (such as Hurricane) and mixes – (e.g. diflufenican + flufenacet, such as Liberator).  However, the threshold for what counts as a ‘minor’ crop is set at 50,000 hectares.  The UK oat area is far in excess of this.  The HSE is now removing EAMUs for ‘major’ crops.  The sector is looking at options including getting an on-label approval for oats, but this may take some time.

Parallel Spray Imports

The Government has pledged to address the loss of parallel spray imports.  As we wrote back in April (see https://abcbooks.co.uk/spray-import-ban/) the HSE has banned the import of equivalent Plant Protection Products (PPP) as from the end of June, as the EU is no longer supplying data to assess whether they are the same products as approved in the UK.  Farming Minister Mark Spencer and Defra secretary Therese Coffey have now written to the NFU stating that they are ‘committed to addressing’ the issue.  There is also an associated problem with seed imported into the UK from the EU, which has been treated.  This especially affects maize and some root crops.  It seems there may be a temporary extension of the approaval for these imports put in place this autumn.  Defra will then look at options for a more long-term solution.

 

Grain Markets

Global Position

With results from the Northern Hemisphere harvest now coming available, forecasts of global grain supply and demand are being firmed-up.  The latest figures from the International Grains Council (IGC) are presented in the table below.  For the current 2023/24 marketing year (2023 harvest) the latest forecasts are shown, alongside the pre-harvest ones from May.

It can be seen that wheat production is forecast to be lower than last season, whilst usage is higher.  This has sharply reduced end-of-year stocks and pushed up the stocks-to-use ration.  All things being equal, this tight supply and demand situation should be pushing up global prices.  However, a glance at the maize figures show there is forecast to be a large crop this year, with big stocks being held in the major exporters.  Large maize crops are expected from the EU, US and S. America.  This ample supply of the world’s main feed grain is putting downwards pressure on all feed grains – including wheat and barley.  This has impacted UK prices (see below).  However, the ‘wheat’ category contains a variety of grades and qualities.  Tight global wheat supplies means that high-quality milling wheats are also in short supply.  This has pushed up the premium for milling grades over feed.

The soya market drives the whole vegetable oil complex, including oilseed rape.  (It will also be important for animal feed prices through this winter too.)   The production and end-stock forecasts have been cut since the pre-harvest estimates.  This has given some support to oilseeds prices through the summer.  However, production levels are high historically and the market looks to be well supplied.  This will keep pressure on oilseed prices.

Domestic Situation

Harvest 2023 is now all but complete in the UK – apart from some areas in the far north.  Overall yields are probably not far off average – probably a little down and quite variable between regions and even farms.  Quality, generally, is not great – although, again, very variable.  This has meant the high  premiums for milling wheat and malting barley have been maintained.

UK feed wheat and barley prices actually firmed a little during the last month (see Key Farm Facts).  This is, to a large extent, currency related.  The fact that UK Base Rates may not go as high as once feared led to a weakening of the Pound.  This has helped increase grain prices, albeit fairly marginally.  Another factor is likely to be slow farmer selling as they concentrate on the tail-end of harvest and autumn cultivations.

The UK looks set to have large volumes of feed grain.  The demand for this could be lacklustre during the 2023/24 season.  Pig and poultry herds/flocks are lower than historically and do not seem likely to rebuild quickly.  Conserved forage in the dairy sector is reported to be of decent quality and quantity – reducing the need for concentrates.  Therefore, a strong export campaign looks needed to help clear domestic markets.  This has got off to a slow start with very little grain being shipped, or even deals being done so far.  UK grain is currently over-priced against alternatives.   This suggests that UK prices may well come under pressure in the months ahead unless the world market provides some unexpected support.

Grain Market Update

The August USDA World Supply and Demand Estimates forecast a slight drop in production relative to the July report.  This is driven by a reduced outlook for Canadian and European wheat production.  Additionally, US maize production forecasts were reduced slightly with lower yields expected, following results from a producer survey.  The sentiment for reducing supply and demand forecasts (month-on-month) is echoed by the International Grains Council who cut both production and stock forecasts for total grains.

Although estimates have been reduced, this years global harvest is forecast to be considerably larger than last years, putting downwards pressure on prices.  As harvests continue across the Northern Hemisphere, and better yield information becomes available, wheat prices have continued to fall.  Suggestions of large crops in Russia, and the ease of shipping costs compared to the same time last year has moved spot feed wheat prices lower after the late July spike.

In the UK, the changeable weather continues to result in a challenging, stop-start harvest, although progress improved at the end of August.  In the South and East, many businesses have now finished harvest for another year.  Reports suggest that both yield and quality are down on last year, with lower proteins and hagbergs a potential challenge for the milling supply chain.  Malting barley nitrogens are low, a positive; but bushel weights are also low.

In August, UK feed wheat values average just over £174 per tonne, down £4 per tonne on the July average.  Milling wheat values have also moved lower, down nearly £5 per tonne on the July average, at £237 per tonne.  There is still a considerable premium of milling wheat over feed (£62 per tonne) which will be supported if quality issues turn out to be correct..

The discount of feed barley to feed wheat has narrowed over the past month.  Reduced availability of the crop has pushed the discount to £22 per tonne on average across August, compared with £28 per tonne in July.  In the last week of August the discount was as narrow as £17 per tonne.

The supply and demand for oilseeds has also eroded prices this month.  There is larger availability of oilseed rape in Europe this season, with expectations of significant carryover into the 2024/25 season. The oilseed rape price averaged £349 per tonne in August, down from £362 per tonne in July.

The value of pulse crops has taken the biggest hit over the last month.   The price of feed beans and feed peas fell by £37 and £41 per tonne, respectively, mont-on-month.  With harvest underway greater availability.  Early reports suggested that quality has been variable.

Global Grains

Grain markets have been increasingly volatile in July, driven once again by the Black Sea.  US maize crop conditions have improved, but weather concerns still linger.

Ukraine/ Russia

The renewal, or lack thereof, of the Black Sea Grain Initiative (BSGI) has been a key watchpoint for grain markets for the past year.  The agreement, guaranteeing the transit of agricultural commodities, broke down on 17th July 2023.  The ending of the BSGI, came with missile strikes at the port of Odessa, and threats of military action against vessels delivering cargos to Ukraine.

In response to the ending of the BSGI, and subsequent concerns about global grain availability, UK feed wheat futures have been more volatile.  Between 17th July and 19th July UK feed wheat futures (November 2023), gained more than £16 per tonne, before falling back by £5 per tonne.

The lack of the BSGI and exports through a key port such as Odessa is undoubtedly a challenge to global grain availability.  However, reports from key commentators highlight the important role of the Danube and exports via Constanta, Romania, have played, and will continue to play, in keeping grain moving.  An increase in Ukrainian grain being exported by road, rail and waterways through Eastern Europe could cause downwards pressure on grain prices in the countries bordering Ukraine.  Some Governments have already placed restrictions on trade – for example grain can only transit through their territories.

The movement of Black Sea grain will continue to be a focal point.  Further attacks on the Danube port of Reni lifted prices on Monday 24th July.

United States

Following last month’s update, the US Corn Belt has received much-needed rain.  Drought as the crop moved towards silking negatively impacted crop conditions and was a risk to yield prospects.

Yield forecasts have been lowered but remain at record levels due to high planted areas.  While weather remains a risk to the crop, the global supply and demand balance is little changed.  In July, the USDA increased the area of maize it expects to be harvested by 900 thousand hectares.

The increase in the area of maize comes at the expense of soyabeans, with the area expected to be harvested falling by 1.6 million hectares.  The cut to the soyabean area has added significant support to the wider vegetable oil complex, including rapeseed.

Hotter weather and less rain is forecast in the Corn Belt through the first week of August so conditions remain uncertain.

Global Supply and Demand

The latest global supply and demand figures highlight the continued view from the USDA that the world will be better supplied with grain this coming season.  But there is a diverging picture between maize and wheat.  Global maize stocks are forecast to grow by 17.8 million tonnes year-on-year. Meanwhile, wheat ending stocks are forecast to fall by 2.8 million tonnes; to the lowest level since 2015/16. Wheat production was estimated to decline further in July’s USDA World Agricultural Supply and Demand Estimates, driven by month-on-month declines in Argentina, Canada, and the EU.