Demand Economics
Agri-Business Consulting

Since last month’s market summary, values have certainly found a direction – but sadly not the one we were all hoping for.  UK wheat and barley prices seemed to plateau last week after losing another £10-15 in the first week of March.  This week (w/c 20th March) has disappointed us all, especially those who still hold old crop parcels in the hope of a bounce, to see the market fall a further £20.  With these sub £200/t levels on old crop wheat, you must ask yourself how much lower this can actually go, and how much personally can you risk.  Have we finally found a bottom for now?  It would be nice to think so, but we could have said the same thing 7, 14, 21 days ago.

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In reality, all we have seen is the war risk premium fully dissolve from the physical price, as the Grain Corridor continues to do its job exceedingly well.  The recent 60-day extension to the agreement has no doubt had an effect on values, as has the news in the financial sector about further inflationary pressure, interest rates, energy prices, and even the delinquency of certain US and EU banks.  To add to the bearish tone there is still a large supply of grains in the spot position coming from Russia and Australia, who continue to export record volumes of wheat.  The UK - even at current prices - still needs to do some work to become export competitive in order to approach a balanced Supply & Demand this season, so this will add pressure to our physical values, but currently we are just tracking all other origins.  As we enter the final quarter of the old crop campaign, this export business will remain very important, not least because domestic feed homes have little demand for their products and will get booked up rather quickly.

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All major markets moves are dotted with short term retracements, so we expect there will be an attempt at a bounce at some point and we need to watch out for this and view it very much as a selling opportunity.  Generally speaking, old crop grain markets feel very tired and “mature”.  New crop is still a little way off and anything can happen weatherwise globally in the next few months.  Drought in Argentina is well reported, but the status of Russia, India and the US is unknown.  We also know the already-reduced Ukraine area is only 70% planted vs. normal, so the market will be factoring this in.  It is likely this is part of the reason that Nov’23 futures have not come down quite so dramatically.

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The USDA report scheduled for 31st March is traditionally a market-mover, as it is the first official estimate of US planting intentions, as well as a Quarterly statement of all commodity stocks – which will give us a stronger indication of what needs to be done for the rest of this marketing season.

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Fertiliser business remains quiet with values slowly ticking lower and most now covered on “old season” material. Some have booked new season urea early on as they came out at more welcomed levels, others are sitting tight with not much news out there that is likely to firm values up in the short term.

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At the time of writing £200 is still achievable for pre-Christmas movement on new crop wheat, but many growers are stating that this is below their cost of production…  There will be some very tricky marketing decisions to be made this season ahead, no doubt.

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To find out more, please contact the team at Cefetra Grain:

• Simon Wilcox, Manager – UK Farm Grain Origination, 07774 822507, wilcox@cefetra.co.uk

• Marc Hinton, Farm Grain Buyer, 07957 791358, hinton@cefetra.co.uk

• Josef Grinczer, Farm Grain Buyer, 07712 325197, grinczer@cefetra.co.uk

• Ian Jervis, Farm Grain Buyer, 07497 185361, jervis@cefetra.co.uk