Cefetra Market Report:
With the current market volatility, stick to what you know
This market continues to offer challenges. Daily volatility continues to be large with significant swings throughout any day.
We have though seen old crop prices reduce so that they are almost now the same as new crop prices. The new crop prices are again threatening recently achieved all-time highs. We all know that underpinning these prices is the situation in the Ukraine and the concerns about their crop, the coming harvest and their ability to export. Whilst currently they are unable to export on to ships, they have managed to move some grains out by rail and truck. This has alleviated some pressure but will not achieve the movement levels they want or need. We have seen recent talk in the press that the UK and the EU are looking at ways to re-open shipments from the Black Sea. There is even a suggestion that the UK will send warships to escort cargoes!! What would happen if Russia attacked one of our ships is anybody’s guess.
We are also seeing other factors impacting upon our markets. We are still very much in the period when weather stories have a significant effect. The hot and dry weather across Europe is negatively affecting quality and yield potential, and we saw a big decline in the forecast for the French crop on Friday 20th May.
The good-to-excellent ratings were reduced by 9% - a decline of 7% from the previous week (the biggest downgrade in history for this time of year). We have however seen much needed rains across the UK. There are similar stories in the US and Canada, with winter wheat crop damage and slow spring wheat plantings lowering yield prospects.
However, as a word of caution these market levels are really driven by European quality grains (i.e. Milling Wheats). Feed Wheat and Feed Barley are now at uncompetitive levels, with corn being significantly cheaper. We are already seeing consumers switch to corn from wheat for their Autumn ration formulations.
Other factors to watch that would cause a downward movement are:
(As above) - exports out of the Ukraine by sea.
US & EU biofuels policies – if they relax their biofuel mandates (as has already been seen in Germany to some extent) this will release grains and oilseeds for other markets.
Feed demand rationing – high prices will cause a reduction in usage.
Covid – still having an impact in China and could reduce demand.
The assassination of Putin (a result!!) or at least the removal of him from power.
Whilst we are not saying the market has peaked and is going to drop, as clearly there are bullish factors in play, there are still the above downside risks, and it is important to understand them. As such, farmers should be taking some cover at these high levels at least enough, for example, to cover any fertiliser that has been purchased for crop’23.
Do keep in close discussion with your merchant about likely pricing and your own targets. There will be volatility and change, but that will also give opportunity, so if everyone knows their aims – both financial and logistical – then we can act quickly for everyone’s benefit.
If you wish to discuss your grain marketing, please do not hesitate to contact us: