The biggest change in the last month has been to the UK old crop wheat supply and demand balance sheet; with the second ethanol plant now closing the 150,000 mt surplus, I mentioned in November, has now increased to about 340,000 mt. It may be this ethanol plant will only be closing for a few months for maintenance; but it is safer to assume that only 439,000 mt will be used and not the original 950,000 mt confidently predicted up to last August.
Adding that to the unprecedented importation of 600,000 mt of wheat; by the end of September; and feed compounders re-formulating to use every ounce of cheap maize possible; it’s not surprising that wheat futures recently hit a £33 per tonne low point from its early August peak!
So in 4 months the UK has moved from a strong internal market geared to import values, and no surplus; to a situation where our domestic prices have fallen sufficiently; that we are now cheaper than French: so a few wheat boats shipped from the South and West coast could help to tighten the wheat UK supply later in the year. As if this was not bad enough Ranks decided to close Solent Flour Mill at Southampton; that really has changed the dynamics of the whole flour milling trade in the UK; and is detrimental to the South in particular. It is good news for all the other flour millers, but no one else. The closure came too late to alter Southern farmers planting intentions: but a lot of the best varieties are ‘dual purpose’ types that yield well as feed or milling: so the farmer can at least decide whether to go for yield rather than spending extra money on nitrogen to increase protein. Some farmers in Southern Counties may decide the cost and risk is too great to continue growing full spec milling wheat
The good news is, our low internal wheat price, means that any new feed wheat imports are just too expensive; as I said in November: it maybe; after this flush of early imports; no more will be required until next April/June; by which time our price could have increased significantly.
Barley in the World is making 10$ to 15$ more than wheat for big boats! If it wasn’t for that fact; you could be worried by the alleged 574,000 mt UK surplus! 128,000 mt has been exported by the end of September: Openfield has 10 malting barley boats to ship before Christmas, so we are doing our bit to get rid of the surplus. The inelastic demand for feed barley should keep the flow going: the malting barley exports will accelerate now until the Brexit deadline at the end of March. Either physically shipped to maltings in mainland EU; or customs cleared warehouses over here. Either way life will not end after the 31st March; I am confident we will still be sending UK malting barley to Europe: and if not to other parts of the World. It was not so long ago that Openfield had to export malting barley to the Ukraine; because of a glut in Europe; so we have seen it all before!
Just as the ‘bears’ are thinking they will have it their way for the rest of the year: exceptional heavy rain; of Biblical proportions; has fallen upon Argentina! I find God is very quick these days! Argentina had just started to unleash cheap milling wheat upon the World market; followed by cheap malting barley and feed grain. This was all for January onwards; but this rain will impair quality and delay the harvest! “Oh dear, what a shame, never mind”.
There is a bit more bullish news: the Russian winter has started early; so temperatures are plunging below freezing with no snow cover on crops yet. Sooner or later Russian wheat exports will slow down: if Argentina cannot pick that up the EU will: so watch this space.
I wouldn’t sell old or new crop wheat at current values: neither would I flat sell new crop malting barley or milling wheat. If forced by a need for cash or space; where feed barley is equal to or above feed wheat I would sell that. Also oilseed rape at circa £335 delivered plus oil bonus is still about as good as its been since harvest; so as its most affected by factors, that could yet change big time; i.e. sterling/euro exchange and the USA/China trade war; its best to cash some in.