Back to All Items

Weekly Commodity Report 20th September 2019

The UK wheat market saw small gains at the end of last week reaching £136/T.


However, the same was not seen in the global markets; with sideways movement for both the US and EU markets.  The increase was therefore attributed at least partly to political news and currency change.  Sterling had gains on news that a more positive Brexit could be likely and closed its week at levels not seen since the end of May.  Both ADHB and Defra reported that the UK wheat end stocks are up 11% from last year to 1,911kt.  Production figures are the highest they have been since 2015/16 at 17.8-18.1 Mln T.  It is expected that there will be a fall in domestic consumption driven by lower demand for feed, partly from better grass growth over the summer months.  A low human and industrial consumption of cereals is also expected mainly due to the low demand for wheat in biofuels, with Vivergo’s plant closed and Ensus mainly using maize.  These reasons contribute to a larger than expected exportable surplus and makes potential post Brexit tariffs even more key to the UK market explaining why Brexit news was the key influence in the UK and again gives us a different picture to the global markets. 

As we inch nearer to another deadline and the vague possibility of a deal, the influence of currency in the UK market will continue to be key.  European grain brokers have bought over 1 Mln T of UK wheat so far in the pre November period as UK wheat has maintained a substantial discount to EU price since harvest.  This premium is currently around £17 down from over £22 for early September.  With UK ports busy, and sterling slightly firmer, fresh exports have slowed.

Maize futures price rose after the US department of Agriculture indicated that export sales had increased.  This cheap imported maize remains key to the price of wheat in the UK and EU, with 4.5 Mln T imported so far this season.  Better than expected crop conditions provided some price pressure.  The global wheat market was focused on dry pre harvest conditions in many key areas.  Australia, Argentina pre harvest and Europe and the black sea region, ahead of the next planting, have all reported dry soils.  This concern renewed demand and supported price.  With so much excess wheat on offer the Black sea have seen a reduction in their dominance.  Russia has still featured in tenders to Egypt but the UK and many EU countries are maintaining a strong export pace.  The USDA world supply and demand report lacked a new story and caused a muted reaction in world grain markets.  The Dow Jones fell 53 points as the US federal reserve announced an interest rate cut.


Confirmation that US soya beans had higher export figures, and had once again been purchased by China caused a rally in price last week.  With at least 3 months of almost exclusively Brazilian bean imports, this change is seen as an import move for both US agriculture and the trade war.  With African Swine Fever’s impact on Chinese soya use still a focus, it seems an increase in demand for soya in chicken feed is assisting in finding soya beans a use in this key market.  This led the trade to increase their holdings in soya beans lifting futures price.  The global supply for soya beans is currently predicted to be 20.6 Mln T less than last year.  Soya oil saw the greatest gains supported by the sharply higher crude oil prices but then dropped back as Saudi Arabia said output from the facilities attacked would soon be restored as demand fell. 


Exercise and the environment are important issues.  An accountant, an entrepreneur and a boxing executive were among 20 friends who participated in an extreme running the Cape Town marathon with sapling trees strapped to their backs.  Not easy when you consider the 42.2km route.


Last year Cape Town suffered its worse drought in a century and authorities had to ration water.  The group were raising money and promoting the planting of native trees to replace invasive species which are far more water hungry.  Local businesses put $3.7m into the fund.  From 2001 to 2018 South Africa lost 1.34 million hectares of tree cover.  A 22% decrease.  The native trees like the Spekboom are better at absorbing carbon dioxide in dry conditions and could top up the water reserves at the same time.

This small forest will one day make a big difference.

Brought to you by Melanie Blake and Martin Humphrey