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November 2018 Market Report

November 2018 Market Report

At best the UK and World grain market has ‘flat lined’ for the last few weeks.  Prices have stabilised, everyone is waiting for the next key event.  Russia is the only player who has carried on in the same way: still pushing on with wheat export sales.  14 million tonnes has already been shipped by October: there remains the credibility gap between Russian export surplus estimate of 35 million tonnes (supported by USDA) and the rest of the English speaking world; who say it’s no more than 25 million tonnes!  We should know by Christmas.

The UK has now had 3 months without Vivergo: and the wheat market has improved from the fall in September.  We came close to actually exporting UK feed wheat from the West Coast, but stronger Sterling stopped that.  We are in a better position than a month ago; for imported wheat is now too dear to get into the UK.  There are some pre-booked cargo’s due from Bulgaria; but that is part of the acknowledged 700,000 mt of imports: which have been front end loaded into the UK, up to October.  There always has been cheap maize available to replace some wheat in rations.  So that’s not new news; some compounders are already at maximum inclusion for maize anyway.  Back to wheat; the UK remains a net importer of about 1.7 million tonnes wheat.  There has been some further UK crop estimates of 14 million tonnes and some as low as 13.5 million tonnes.

There remains a big debate about the obvious lack of forage and the loss of DDG’s; so usage in compound feed production is likely to increase.  Being conservative; you still only come up with a wafer thin surplus of 150,000 mt of UK wheat; as we saw last year, even a modest adjustment to the planted area, or yield and that would be wiped out completely; so the timing of wheat imports is critical; if it now switches, like last year to the later months of May/June then UK wheat should remain firmer from January onwards; assuming we get the usual winter feed demand.

Barley is more interesting!  On paper, unlike the wheat, there is an alleged surplus of about 579,000 tonnes.  By the end of September 120,000 mt has been exported: we have chipped in with a few boats of malting barley.  Our malting exports are being hampered by a lack of water in the Rhine and Danube, last week there was only 50 cms of water in the Rhine: if it was 1945 the British Army could have walked across!  But its serious: the lack of rain in Europe means that grain barges cannot operate on the Mosel; so French malting barley is not getting through to German maltsters either.  Fortunately we have enough export sales to maltings in major ports like Hamburg and Antwerp: but its an indicator of the poor dry seed beds into which a lot of French and German crops have been planted.  So barley is again enigmatic: Spain and Italy don’t want our coasters, as they had good harvests: but barley remains tight in the World; so if a big boat tender comes up for Saudi Arabia; you would have to think twice about selling a 60,000 tonne Panamax, as it may take some finding.

So even with a much larger surplus than wheat; there is no rush to sell. Two other points; unless Brexit is sorted out soon: the UK is committed to physically shipping its 250/300 kmt malting barley surplus by the end of March 2019; or risk WTO tariffs.  So a lot of barley is going to disappear in the next 5 months.  Secondly, the DEFRA carry in stock figure of 1.12 million tonnes looks very optimistic!   UK barley was on bare boards by the time harvest started; so apart from malting barley stocks it’s difficult to imagine where that barley could have been stored.

As forecast oilseed rape has rallied recently; there can be no doubt, that because of dry growing conditions in the UK and Northern Europe – resulting in poorly established crops being ripped up – production will be down on last year.  Apart from the UK; other key countries will have less Canola to export. Strong sterling has kept export values technically low; but any problems around Brexit – with the Government say losing a key vote – will send sterling plunging downwards: so look out for that as a trigger for selling.