Demand Economics
Agri-Business Consulting
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Monthly eNewsletter
1st June 2023
Cefetra Market Report
The old City of London adage of “sell in May and go away” could unfortunately be fairly applied to our grain markets, and indeed most global commodities. The UK started this season’s campaign with a strong production figure in most crops and no more than a normal demand, so a heavy Supply & Demand balance sheet. Throughout the period we have been beset with hits to the demand side – notably bird flu, falling milk prices, and the general inflationary economic slowdown – and this has just served to pressure the trade as we approach the ‘back end’ and traders don’t want to be left holding the baby! Initially, the high prices masked the signals we all should have seen, but it is a problem for most people to trade into a bear market – we have a natural optimism that even in the face of such negative factors means we expect tomorrow to be a better day, and so we fail to trade it out.
One of the main glimmers of hope was the 18th May expiry of the Black Sea safe logistics corridor. Political posturing being what it is, the grumblings from the Kremlin were pointing to this agreement renewal being the most likely to fail, and in the prior week we saw speculators buying wheat futures in the Paris and London exchanges, driving the November UK price to £200 again. As we now know, there was in fact no particular problem for the stakeholders to sign up once more, because in truth it suits all sides. Ship-borne exports of all goods – not just wheat, corn and sunseed – out of the region have been at record levels, and there seems little that will upset the current situation for the foreseeable future. It is important to note that the jump to £200 November London futures (and €240 Sept Paris futures) does not represent “fair value” for these crops, it was just that the big money traders were already running record short positions and were just reducing their risk exposure. In modern grain trading these short-term blips must be viewed as selling opportunities for the farmer. We have all been schooled by the market this year. Such is the volatility and extent of the swings, hanging onto a specific price to trade at should be less of a priority than identifying the right day to trade.
Once the Ukraine/Russia deal was done, prices fell away quickly, the Funds have refreshed their large short positions, and the bearish trend resumed…
A similar situation exists in Chicago. Dealers in US crops are also heavily short, despite poor condition reports. And that brings us round nicely to the only element over which you have no control – the weather. Those hard red winter wheats in the States are in very poor condition, and any hint of hot and dry patterns in the wheat belt, or indeed the Midwest soy and corn-growing areas, will fire up a “weather market” and given these big short positions we could see some very fast, very big moves to the upside as speculators scrabble for cover.
In Europe you will have seen the problems in Spain with drought and increasing heat having obliterated the barley and other crops. Spain is a traditional buyer of UK grain (mainly feed barley), and with us having the heavy S&D situation and likely stocks, we will be the cheapest origin in Europe and should be able to put on a decent export programme to the Southern regions. Already our partners in Iberia are knocking on the door.
So it appears that external macro market influences have faded for the moment, and at home we enter the main growing phase of new crops with improving weather and decent potential, but the markets are unlikely to be particularly benign. It is with some relief we have seen lower fertiliser pricing – the CF Nitram reset has just come in at £320+, though that’s still poor value against urea – but as we have said before, trading one element on its own does not reduce your risk – it just shifts it to become more important on the other elements that make up your business. Whatever price the inputs, it only makes sense if you’re booking the output at the same time to lock in the margin.
As ever, we encourage you to speak to your grain merchant and together put a little time into casting a critical eye over your business plans and to discuss the possibilities for beneficial change. We are coming out of an amazing campaign where for some reason selling £300 wheat and £700 rapeseed was not as easy to do as you might have expected. That only serves to highlight the need for discussion and collaboration with Independent partners, and to remain focussed on the optimum outcome for you and your business.
To find out more, please contact the team at Cefetra Grain:
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Simon Wilcox, Manager – UK Farm Grain Origination, 07774 822507, wilcox@cefetra.co.uk
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Marc Hinton, Farm Grain Buyer, 07957 791358, hinton@cefetra.co.uk
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Josef Grinczer, Farm Grain Buyer, 07712 325197, grinczer@cefetra.co.uk
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Ian Jervis, Farm Grain Buyer, 07497 185361, jervis@cefetra.co.uk
Feed & Livestock Section
Molasses
The new tender period started at the beginning of May and will run until the 30th September. The tender has once again been awarded to ForFarmers. Members have been informed and given details of how to order. Orders can be placed directly with ForFarmers or through the office.
Tote Bags
Several feed supplement and fat products are available in tote bags for a small additional discount. If you have the facilities to be able to store tote bags and would like to take advantage of the discount, please specify this when placing your order.
Game Feed
Just a reminder that the Group’s game feed tender for the 2023 season has been awarded to Duffields Keepers Choice game feed. Orders can be placed directly with the mill on 01508 470661, or with Richard Leach on 07831 545035, who’s already contacted many members to introduce himself and explain their product range. If you require medicated feeds, please allow enough time for the feed to be produced and please make your veterinary practice aware that Duffields will be contacting them to request a prescription. Please be aware that the delivery time for standard products is 3-5 clear working days and for medicated products it’s 5-10 clear working days, ideally with a 2 day delivery window.
Correction
In last month’s newsletter, members were informed that Geoff Homewood from GLW would be contacting members in Area A with a view to making an appointment to visit and inform them of the products and services GLW can provide, prior to the new compound feed tender year starting in September. This was incorrect and it should have read members in Area B.
And Finally...
After Apollo 11 landed, the Moon’s temperature rose by 2 degrees C and 80% of the ‘Close Door’ buttons in lifts are just for show: the doors are on a timer.
For more details on any matter raised in the Feed & Livestock section, please contact Joe in the office:
Joe Cobb, Feed & Livestock Manager, 01865 393 139
Orion Annual General Meeting Update
Many thanks to those Members and guests who attended the 2023 AGM on 10th May at Millets Farm Centre and enjoyed a lovely lunch afterwards. At the meeting, Andrew Farrant and Nick Frost retired as Directors and we thank them both for their many years of service to the Group; thirteen years in Andrew’s case, including three as Chairman and 12 years in Nick’s case. We also welcomed Becci Berry to the Board after she was unanimously elected at the meeting. Becci farms at Coleshill, Wiltshire.
