UK ports are busy as the market focuses on exports.
There is a large amount of unsold organic malting barley on farm as businesses do not want to risk post-Brexit tariffs.
And global grains have continued to recover from market lows.
What to watch
Export pace in the US, Europe and the Black Sea was running ahead year on year but it remained to be seen if it could be sustained.
London wheat futures for May closed on Thursday at £143.60 per tonne, a rise of 0.7% week on week.
Paris wheat futures for December settled at E488.75 per tonne, a gain of 0.9% week on week.
Paris rapeseed futures for November settled at E386.00 per tonne, a fall of 0.2% week on week.
Uncertainty slows down feed market
The feed market is slower than usual this season.
Buyers have confidence in the supply and are buying to requirement as there remains uncertainty in the market due to Brexit.
We lack clarity as to how organic certification equivalence with the European Union may be impacted by a no-deal Brexit – the worst case scenario being that there would be a hiatus in equivalence, impeding trade.
This risk affects the dairy sector which relies on EU milk processing, making dairy feed sales less certain.
It is ruminants that eat most UK-sourced organic feed grains (with poultry relying to a far greater extent on imported supplies) and therefore dairy feed producers are seeing uncertainty from their customers which impacts their purchasing of feed grains.
It is easier to sell milling wheat than feed wheat at present.
Malting barley is largely exported, and with the possibility of a no-deal Brexit and imposition of tariffs on entry into the EU at E90 (£80) per tonne there is little scope for any business as neither party wishes to risk this additional cost.
This means there is a large volume of unsold malting barley on-farm.
If there is a further extension to the current relationship with the EU there will be a bun-fight to get malting barley sold and moved ahead of the new deadline.
It is possible this uncertainty will reduce value and see some of this grain move to the feed market.
Whatever the outcome of Brexit, the situation has highlighted the imbalance in production between the feed and human consumption markets.
The high premiums the human consumption market has delivered over feed means fewer farmers are now feed grain producers, which is the biggest market available.
Strategically, having a foot in both camps is beneficial as external influences can have a significant impact, leaving producers with uncertainty.
Ex-farm price expectations: feed wheat £250-255 per tonne, feed barley, £250-255, feed oats £235-240, milling wheat £265-315, malting barley £n/a, milling oats £270-280.
Andrew Trump, Organic Arable
Ports ‘flat out’ as Brexit approaches
UK markets are focused on execution.
Ports are flat out loading ships for EU and third country destinations.
The actual tonnage of cereal commodities and pulses shipped between July and the end of October will be interesting to see but in reality, it could easily be close to 1.5m tonnes.
The recent rain has frustrated the loading of ships, pushed vessels out of position and pulled hard on domestic transport but it still proves the UK can ship commodities just as much as we can import them.
Crop numbers still remain a relative unknown.
Defra published its revised June England area numbers and is due to publish crop numbers in the coming week.
The uncertainty surrounding the wheat area will cause many to question any published crop number.
The latest number would imply an area increase of 8.46% or 132,000 hectares compared to the published 2018 England BPS area.
Whereas many agree there was an area increase in wheat, 8.46% seems hard to swallow.
Yield estimates are also going to be particularly difficult to predict this year and, as such, the market is going to have to decide what it believes when the final crop numbers are published and the impact it could have on prices.
Meanwhile UK prices have been pulled up on the back of a generally buoyant global market as concerns start to arise about quality and crop sizes elsewhere in the world.
Cecilia Pryce, Openfield
Strong demand propels European wheat prices higher
European grain markets have had a very positive week, with Paris Matif wheat up nearly E5 per tonne (£4.40 per tonne).
A couple of factors have underpinned this price advance.
Firstly, the euro continues to lose ground against the dollar.
It now sits at its lowest level against the dollar since May 2017, as economic prospects between the two economies diverge and as the European central Bank re-start its money printing machine.
Secondly, in a wheat tender last week, Egypt bought a tranche of French origin wheat, alongside the usual Russian tonnage.
This highlights how summer’s re-alignment of European cash values with Black Sea wheat has put European wheat exports back in the picture.
Only a couple of months ago, EU wheat was trading at a $15-per-tonne (£12.12-per-tonne) premium to Russian wheat.
This new competitiveness comes despite the pace of EU wheat exports already being adequate to meet end of year targets and with a full current vessel line-up across western European ports.
Even today, despite the price gains over the week, French wheat features heavily in today’s new tender by Egypt.
Rupert Somerscales, ODA
Markets recover from lows
Global grains continue their consolidation from the market lows set earlier in September.
Slow harvest progress of this season’s spring wheat crops in North America and Canada due to rain and snow is raising concerns over quality, although temperatures are set to climb steadily over the coming weeks.
Some southern hemisphere crops are still threatened.
Continued dryness and limited patchy rainfall is forecast for Australia, while colder, wetter conditions are forecast for Argentina, although a record wheat crop is projected.
In the Black Sea region, dryness is expected to reduce Kazakhstan’s 2019 grain crop, while in Ukraine, exports will soon switch to maize, although traders have asked the government to increase this season’s wheat export quota.
Russian export prices have firmed due to demands from shippers and slow farmer selling.
Values are moving closer to the interior replacement price, causing farmers to hold supplies off the market.
This week’s US Department of Agriculture stocks report showed US maize stocks lower than expected, supporting a sharp rally in prices, which spilled over into the Chicago wheat trading pits for a day.
However, wheat stocks came in line with trade expectations
The export pace in the US, Europe and the Black Sea is running ahead year on year, which is underpinning cash premiums.
However, it remains to be seen if this demand can be carried through the season.
David Woodland, ADM Agriculture
Rapeseed continues to hover over season highs
In the wake of a surprisingly bullish US Grain Stocks report, adverse weather conditions in the southern hemisphere and North America as well as significant import requirements after this year’s crop failure across Europe, rapeseed has continued to be well supported this week.
The November 2019 Euronext rapeseed futures contract has now gained £20 per tonne since the beginning of the year, or 6%, while on the physical market, spot prices delivered Erith are standing at their highest level since April 2017.
On Monday, the USDA pegged the US soybean stocks as of September 1 at a record 913m bushels ie +108% on the previous year but below the 982m bushels expected by the trade.
The main change came from the 2018 harvest with a hefty 161,000-hectare reduction in acreage and a 1-bushel-per-acre cut in yield.
Combined with the delayed soybean harvest in the Midwest, the recent large Chinese purchases of US soybeans and less than ideal planting conditions in parts of Brazil, the oilseed has jumped more than 5.6% since September 1, touching on Tuesday its highest level in more than two months.
Medium-term, the drought-stricken Australian canola crop and the snow arriving in Canada could limit further exports in an already tight global market.
In the meantime, Brexit and its impact on sterling will remain a major unknown at least until the end of the month.
Benjamin Bodart, CRM AgriCommodities