November wheat futures held a full week of small price drops finishing the week at just above £172/T. News and events continue to affect a market with a strong connection to the European and Global supply and demand balance sheet.
In the UK, this week’s big news (other than that relating to Bexit negotiations and its associated ‘what ifs’) is that the Vivergo biofuels plant is to close. Wheat imports that had been destined for Vivergo were seen in the South west found a new discounted home to certain feed mill. The revised USDA figures also added a bit more negative pressure on the UK supply and demand balance adjusts. The UK November wheat contract hit its lowest level since mid-July but is still well above contract lows. UK consumers are not active as they hold sufficient nearby cover, or meet their needs by bringing contracts forward. Sellers of wheat are still feeling relaxed and are happy to wait for prices to return to recent highs.
The recent USDA report revised the Australian and Canadian crop size downwards but this was compensated through increases in other key areas such as Russia and Kazakhstan, which provided a modest increase in world wheat production overall. World wheat production is now at 733 Mln T, which is 25 Mln T below last year’s record year. Small increases in EU and US corn production has adjusted the global corn production up 35 by Mln T when compared to 2017/18, which has helped hold prices down. As a cautionary note, it should be remembered that there are less stocks available and global consumption continues to rise. Brexit negotiation and trade disputes continue to affect global markets, which in turn influences currency and commodity markets directly in an already volatile market. The Russian rouble weakened further which did little to slow the high level of Russian export sales, which are currently running at of over 1 Mln T a week. The market has expectations that Russia will eventually take action to reduce exports at some point in the season.
Soya bean meal prices remained low but trading was variable last week. US soya continues to experience depressed prices compared to Brazilian soya, with the premium for the Brazilian product now at approximately 25% (Europe also buys Brazilian). The USDA made smaller changes in this market with a decrease in carry out stock made mainly due to increased predictions for the crush. Trade wars continue to rumble on. The positive news that China was – and had - accepted old crop was replaced by news that a more recent boat destined for China had been rerouted to South Korea by the time the ship was ready to leave – confirmation that the dispute is between China and the US is not over. China is expected to continue push for lower soya use, replacing it where possible with other, mainly imported, oilmeals and domestic grain stocks. Overall, the facts remain that the crop size and requirements globally are tight, and we will need to use the US soya somewhere and some point.
Last of the Summer wine? Three farming batchelor brothers (aged 72-80), who have farmed 25 hectares near Melbourne, and lived in the same shack for 80 years are about to sell their property for AUS $50m (£27m). Will it change their lives? Watch the link to find out how much, or if at all!