Last month we have had our UK ‘weather market’ for the time being! In fact aided and abetted by the bullish expectations of the May USDA reports; we enjoyed ‘Twin Peaks’ of price, in the last week of April and the first week of May. In the event the USDA report on the 12 May was neutral at best and certainly bearish – if believed – to the 2021/22 season.
We are still left with a residue of what seems to be pretty good prices for new crop wheat and barley. With beneficial rain received everywhere in the UK, and Northern and Western Europe, farmers are happier to make forward sales.
The old crop still remains tight on supply and this will now continue until new crop harvest starts. The cold and dry weather in March and April pushed harvest further back; even in the middle of May very little winter barley had emerged into ear. There are serious questions about whether the UK actually has the 1.5 million tonnes of wheat in stock which it needs to keep the mills producing between the end of June and first half of August. Some of that gap is usually filled by imported wheat and French new crop cargos have already been purchased for second half July arrival. French wheat is also later so some of those French sellers are now trying to buy back the earlier boats sold fearing they won’t have the new crop wheat available for July shipment.
Some manufacturers may have underestimated the increased demand post lockdown. They were caught with too much stock and finished product a year ago and now they have gone too far the other way and will have to chase the market for supplies in the next few months.
Returning to the new crop. The relatively high wheat and barley values left over from the weather market requires closer inspection. Take feed wheat for example, in mid-May it was still making £180 ex farm Nov/Dec. That price was only reached last November when it was accepted that the UK only had 9.5 million tonnes of wheat and large imports were necessary. The AHDB say that we should have about 14.5 million tonnes of wheat this time, so we wonder what the justification could possibly be for us to be at that same level of price now, four months before harvest with five million more tonnes expected and still the possibility that we may even have an exportable surplus ourselves.
Next new crop feed barley. Some July/August feed barley traded at £155/£160 ex farm in mid-May. We cannot remember feed barley for harvest collection ever being worth that sort of money when selling forward at that time of year! Two things we know for sure. Firstly when we get into the swing of harvesting barley, the UK will not be short of barley in July or August! Secondly: We don’t know if at 14.4 million tonnes of wheat we will actually have any exportable surplus. In the case of barley we will have an exportable surplus for sure.
We have 13 months to go before we know how all this works out. A lot can change as we may have another “weather market” yet caused by late plantings of USA maize, or maybe a late summer drought in Russia. It’s likely that old crop for wheat may stay very firm until we see new crop, so that could be up to first half August. New crop French barley will be off by the end of June, so our old crop will stay firm until we start ours in July. Post Mr Putin’s election, Russia my start dumping its wheat on the world market in September and October. By then we will know if we are going to be net importers or not. If we are then, coupled with the second ethanol plant coming on stream in the New Year, it maybe that February, March and April 2022 will be the best time to sell feed wheat.