Wednesday, 25 October 2017

October 2017 Update by Mike Temple

With the exception of a few fields of beans, October has largely seen the end of the 2017 harvest. A settled period during the first half of the month has also allowed growers to continue drilling much later than had been expected a month ago with some farmers now even claiming that it is ‘too dry’!

Old crop values have traded horizontally for the last month. Wheat is valued at £143-£145/t for November (depending on location) and given the scale of world wheat and corn stocks, unless there is a significant devaluation in the pound or a weather event, it seems unlikely that these values will move too far. Feed barley has firmed a little more, now valued at £126-£128 for November; this seems in-part due to compounders replacing more wheat with barley because of the price differential. Having already shortened from roughly £25/t difference to now close to £15/t difference, barley would soon lose its price advantage if it were to become any more expensive. Similarly with currency remaining static and imports taking the heat out of buying-demand, OSR has remained flat with values still around £312 for November.

Given the lack of movement in old crop values and the progress of autumn drilling, more attention is now being paid to next year’s harvest and prices. At the time of writing, November’18 feed wheat is worth £147/t, with harvest and September valued at £142 and £144 respectively. Given the size of world wheat and corn stocks, these values would be much lower if it were not for the weakness of the pound, but this doesn’t seem to be encouraging many growers to sell forward as these values have now become ‘the norm’.

Over the next 18 months the only thing in which you can be certain, is in uncertainty itself. Britain will continue to negotiate exiting the EU and within 18 months will have either left or be in a transition deal, the consequences of which are yet unknown, not to mention uncertainty in the rest of the EU and USA. As a result, predicting grain prices going forward becomes increasingly difficult. Growers at this point should start to look at ways to minimise their risk for next harvest. The most straightforward way of doing this is to use grain pools to market a percentage of your grain. GrainCo pools remove the ‘emotion’ in trading to ensure you receive a good-average value for your grain whilst also easing cash-flow requirements through flexible interim payments and harvest-advances.

Forward values over the next couple of years could easily vary by £20-30/t: if fixing a price for a proportion of next year’s harvest does not look appealing then achieving a good average through a pool is the most prudent course of action at the moment.

UK and imported AN both continue to trade at similar values between £230-235. It is difficult to see imported product gaining business back in the short term unless the currency strengthens. Urea is thought to be at the top-end of the market for now, with prices expected to drop back in the new year.

GrainCo Ltd – 0191 428 7700