Arable
Wet autumn dampens outlook for UK combinable crops
• Domestic grain markets in turmoil • Winter cereal crops largely undrilled • Global wheat stocks at record levels
odden fields and the wet- test autumn in memory could have a bigger impact than Brexit on UK grain prices over the coming months. The difference between the tur- moil of UK grain production dur- ing the past three months could not be in sharper contrast to the relatively stable situation that largely defines global markets, says COFCO UK trading direc- tor Stuart Shiells (pictured right). “As if Brexit delays, imminent elections and a strengthened pound were not enough for mar- kets to cope with, continuing wet weather has added real concerns over 2020 wheat production and the balance of UK cropping.” Sentiment at this time of year usually driven by supply and de- mand for old crop grain – but all eyes are now on new crop. Much of
S
the winter cereal area still hasn’t been drilled and will now go in as spring cropping instead.
“
Wet weather has added real concerns over 2020 wheat production
Global prospects Across the world, however, it is largely a different story. Supply and demand is relatively well bal- anced and prices are under pres- sure – with little evidence that se- rious weather events elsewhere will change this outlook soon. “Concerns over US corn plant- ings came to little after the short- lived rally they created in the summer and apart from a few
unknowns such as the Austral- ian harvest, the global picture is pretty much resolved,” says Mr Shiells.
“There is an abundant supply of wheat in the world with No- vember’s USDA report showing production decreases in the US, Australia and Argentina largely offset by gains in Russia, Ukraine and the EU. “Russia could still exert some influence with its 75m tonne wheat crop. Although this is slightly larger than the previ- ous campaign, exports are signif- icantly behind the same time last year, leaving potential for more pressure on markets in 2020.
Wheat stocks
Overall global wheat ending stocks remain at record levels. There is little fear of shortages moving forward – with the only real source of incremental de- mand a possible US-China trade deal, says Mr Shiells.
Estimates of the 2019 UK wheat crop currently stand at around 16.3m tonnes. An ex- portable surplus of 2.2m tonnes has been widely predicted along with a significant carryout. But as the challenging autumn plays out, this is up for debate.
Grain prices could see record carryout
The relative strength of new crop prices will inevitably encourage growers to store grain into next season. This could result in a record car- ryout – potentially at least. “Aside from political up-
heaval, delayed autumn drill- ings are pushing UK prices higher as the prospect of a tight 2020/21 season and a return to the UK being a net importer becomes an increas- ing reality,” says Mr Shiells.
Competitive
The implications of this are significant. In a season of high exports, for example, UK wheat futures trade at a dis- count to France’s MATIF in order to remain export com- petitive. Conversely, in a sea- son of net imports, it moves to a premium.
“The recent new crop ral- ly has taken this fully into ac- count,” says Mr Shiells. And with November 2020 futures in London at a premium to Paris, there may remain lit- tle scope for this premium to widen further.
“While wheat output will
be significantly reduced next year, the barley crop could hit another record with in- creased spring crop plant- ings having a major effect on the traditional balance of UK cropping,” says Mr Shiells. “Low
domestic yields
against a backdrop of high global supply is not a good sit- uation to be in and our short- term weather issues could well prove to have long-term implications to UK growers.”
Fresh export trade has been minimal since October, says Stuart Shiells DECEMBER 2019 • ANGLIA FARMER 11
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