A period of relative calm then followed but there always seemed to be this nagging doubt that all was not as comfortable as it felt. Setting aside the logistical problems associated with Russia’s ability to feed the world, it seemed highly likely that the wider world market would probably remain in a fairly narrow trading range but the question marks over Europe and, in particular the UK, were ever present. The UK balance sheet really never looked that comfortable, especially with such a large imported figure pencilled in, coupled with a weak sterling and strong EU feed wheat levels. As expected, we have seen in recent weeks the first real squeeze on supply for more than five years and whether we have seen prices at their peak for 2017 crop or not remains to be seen. I suspect that what is of more relevance to most of us is will be the outcome of the 2018/19 season. Without question, we have more weather related production concerns over a wider area than we did a year ago, plus the potential of another tight UK S & D situation depending upon a few factors that are yet to be determined at this stage. Of course there a number of possible scenarios that we could experience but, as a starting point, let’s assume that the wet Autumn and Winter might not have been enjoyed by some crops around the UK and, for some, this will lead to the conclusion that yield potential could be better and it probably wouldn’t be a surprise if we saw a fourth consecutive drop in UK wheat production, assuming that the 2017 DEFRA figure is on the optimistic side.
THE UK BALANCE SHEET REALLY NEVER LOOKED THAT COMFORTABLE.
As ever, the bigger picture will have an influence on the UK market as indeed it is at the moment, which means there is still of lot of water to go under the bridge and it is too early to draw any concrete conclusions but I doubt that much of the trade will be short. So far in 2018, we have probably seen more weather related concerns than in any of the previous five years and in Argentina the first real evidence of the negative impact upon production. Whatever does or does not happen as we approach the 2018 harvest is, as always, beyond our control. However, that said, there is plenty of food for thought going forward and how we deal with the outcome and potential market volatility is very much within our control. At the very least I expect to see more interesting times than we have in recent years and, for anybody that has been involved for much less than 5 years, I expect you will learn a lot in the next 18 months.
Chart 1: Ending Stock - World vs China
300.00 250.00 200.00 150.00 100.00 50.00 0.00
World China
Source: USDA
Darrell Yarwood E:
darrell.yarwood@adm.com T: +44(0)1223 265169
11 | ADMISI - The Ghost In The Machine | May/June 2018
2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018 2018/2019
Carry out Stock (MMT)
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