News

Grain markets took this week as weather concerns in Europe and the Black Sea/Balkans culminated in downward revisions to crop estimates. Strategy Grains reduced the EU 27 soft wheat crop down by 3.5 mln mt to 129.5 mln with reductions in France, Germany and the UK the main changes. Although this was largely expected it is anticipated that these could be lowered further in the coming weeks, this will not be known until the combines are into the teeth of the crop across Europe.

The real market mover however was comments emanating from Russia which inferred that their crop and therefore their exportable surplus could be significantly reduced. This led some to speculate that we could see export restrictions. Possibly in the form of export taxes, as witnessed in the 2007/08 drought year, when domestic prices rocketed and Russian inflation surged. It is unlikely that they will allow this to happen again and the Russian Government could take measures to control exports in order to protect stocks until their harvest can be better assessed. For the time being at least, traders are unwilling to sell wheat on the International market based on Russian execution which is usually the benchmark for Global wheat prices.

It should be remembered that the difference between the bull run in 2007/08 and what we are witnessing today is that Global wheat stocks are 30% higher although it is important to understand where those stocks are. At least two thirds of this resides in India, China and the US, and it is fair to assume that India and China will not feature prominently in the export market as their populations expand and domestic consumption continues to grow. The US has about 30 mln mt which was uncompetitive against EU /Black Sea prices but has now come more into line following the sharp rise in EU prices. With Russia potentially out of the game, Canada in a mess due to reduced plantings following heavy rains, the Southern Hemisphere harvest still 4-6 months away and the EU surplus below expectations there are solid reasons for the recent price increases.

However, we are not convinced that a 2007/08 type bull run can be justified given the increased Global stock levels we have today.

The more likely scenario for higher prices would be unfavourable crop conditions for the US Maize crop which cannot be discounted as some weather forecasts are calling for a high pressure ridge which could affect yield as the crop enters its critical pollination phase. Given the fact that the US produces 40% of the Worlds maize and that 1/3rd of their production goes into ethanol production as an alternative to crude oil, any significant problems could have major implications for the Global feed grains matrix and a cue for prices to disappear over the horizon.

In the meantime the market will be prone to bouts of profit taking, but with producers now relaxed sellers, consumers, globally, poorly covered and Investment Funds eyeing a potential profit opportunity it is likely that any weakness will be seen as a buying opportunity, until production can be better assessed.

Wheat

Grain rallies

Wow: Grain prices have accelerated through the week after a brief rest on Tuesday. Ex farm feed wheat levels have reached £120 for autumn collection and £130 for summer. The reasons are much the same as we have seen for the past couple of weeks, wet weather delaying shipments from the Balkan region and continued hot and dry conditions in much of Europe.

An additional element is the situation in Russia where the authorities are talking about the worst drought in 130 years. None of this is really new, but the information has reached index funds and they have been buying futures in anticipation of even higher levels.

More parochially the UK has been selling wheat for shipment within the EU for spot to March shipment. While all this has been going on our domestic compounders remain on the sidelines.

Outlook: The market has got up a head of steam & whatever the outcome of the harvests no one wants to see it at the moment.

Seed

Every day a new price list reflecting the dramatic changes in ex farm grain prices has made life somewhat difficult for all concerned. There is no shortage of wheat varieties other than the new Group 3 variety Invicta. Although Casatta barley is in tight supply as is new Oat variety Balado.

On the OSR front the Dimension order books reflect just how well the crop looks on farm and at our various trial sites. Castille replacement Grandia is having an excellent run in the French trials exceeding yield expectations. Current figures show that Grandia has a higher gross output per ha than FSS Castille, a massive £140.00 per ha thanks to its higher yield and 46% + oil content.

For more information on Cereal and Oilseed rape varieties available please contact your Openfield Farm Business Manager or the seed department on 01476 862730

Oilseed Rape

Indicative values: Harvest £273ex farm, November £283 ex farm
Lower than anticipated yields across the EU
Continuing rains could delay UK harvest

Harvest prices continue to firm on a back drop of increasing fears over the condition of the crops in both the EU and Canada. Germany reduced its crop forecast down 10.8% to 5.6million tonnes from last year`s 6.28 million tonne crop and France has reduced its projected yields by 17%. Weather remains the key driver in Canada with excessive rains resulting in prices hitting an 11 month high.

The Matif has moved markedly this week with the August contract hitting a 22 month high before losing part of its gain on Friday ending, up €16 on the week at the time of writing. The deteriorating prospects of the EU crop coupled with the reduction in the Ukraine crop as a result of a cold winter and wet summer and the extremely wet spring in Canada have all fuelled the recent highs.

Outlook: With disappointing early yields across the EU and the fear of further rains delaying harvest, prices in the short term are likely to remain firm. Let`s hope the ominous rains on St Swithins day does not result in a further 40 days of rain.

Oats

Old crop all finished. New crop values rising due to adverse weather as other commodities firm in price. Indicative harvest prices of £90-£95 dependent on area. Very little has been traded as people await harvest to gauge both yields and quality.

Pulses

Still a large amount of old crop peas remain unsold with limited scope for trading. New crop feed bean prices have rallied with the dry weather although compound homes remain out of the market. Prices have not been tempered with French harvest for beans 2 weeks away and fears that yields look like being reduced. September values mid £130`s, very little volume traded.

Fertiliser

A number of trade journals have been reporting this week about the challenge facing the Lithuanian AN producer. This follows the increase in price from the Russian gas producers.

The outcome of this is a replacement cost for Lithan AN of circa £ 215 for September. Lithan is usually expected to trade at £10 below home produced AN, however if £ 215 is a true reflection then for the moment parity is the case.

Whilst the market can never maintain the fervour of the June/July offer, the August order book still has momentum, helped by a little more confidence in the grain market. Demand should stay strong making August / September Nitram a good opportunity, while it lasts.

Malting Barley

Markets continue to react to the hot dry weather that has engulfed most of the UK and Western Europe over the last few weeks.

With all commodity market`s being carried by short covering and fund buying. We have seen samples from first cut winter barley coming through and the results so far suggest an average crop with nitrogen levels seen at 1.3N-1.5N and average to slightly better than average yield figures. Screenings also appear to be good.

We wait to see how the crop progresses with attention turned to the spring crop. Nearby Matif malting barley futures have gained €5 over the week and with STG continuing to trade at the higher end of its recent trading range has helped support UK values.

Indicative values reflect £118-£120 ex farm for the October position.

Early Bird Pool

Openfied Marketing is pleased to offer an Early Bird Pool for the 2011 crop.

This is a product designed for those growers who wish to take advantage of the current buoyant market conditions for the crop that they are going to plant this autumn.

Given current weather patterns, we don`t know where or when this market will peak, but a good average locked in during the course of this summer will provide confidence to plant the crop this autumn.

There are 2 choices: Autumn 2011 (Oct-Dec) and Spring 2012 (Jan-Mar).

We will be marketing the pool during this summer and we will publish the price in October of this year.

Tonnage will be limited. Please contact your Farm Business Manager for further details. The early bird...

Disclaimer

While the information contained herein is believed to be reliable, Openfield makes no representation as to its accuracy or completeness. Any statement non-factual in nature constitutes current opinion, which are subject to change.