November wheat futures appear to have touched a 5-month low on the 23rd August at £136.55 and in the successive 10 trading days have struggled to rise to about £142/t and are currently trading at £140/t; similar trading patterns can be seen in French wheat and maize.
November wheat futures had retained a €10/t discount to the Matif during August, but in the first week of September the differential had fallen to €6/t which means that we are close to price-parity, inhibiting exports. The UK more-or-less ran out of wheat in July, having exported 1.4mt (and imported 1.9mt). It is believed that in the UK supply and demand balance sheet that we carried in only 1.6mt of old crop (about 1mt less than last year) and produced about 14.8mt of wheat for this year 2017-2018 (14.3mt last year). Thus early prognosis for this year is that the UK should be relatively self-sufficient for both feed and milling wheat. Quality is variable from farm to farm, so that multiple niche products are unsuitable for exporters who would rather have a binary market (feed or flour) rather than this disparate market. Some flourmillers appear to be better at handling lower Hagbergs than others, so there is a range of milling premiums in the range of £20-28/t. In the main, UK milling wheat will mainly be used by domestic millers, with less than a 0.5mt exportable surplus. UK farmers are busy dealing with wet wheat (some still harvesting), waiting for quality analyses and are about to start cultivating and drilling fields ready for next year’s crop; very few are interested in selling.
The Black Sea has an earlier harvest than France, so the former are busy mopping up all the export tenders. France seems to have taken the decision to wait until the Black Sea is exhausted before it starts to export, rather than compete head-to- head and so drive prices down. However the Black Sea has a larger harvest than is usual, so France may be waiting a while – but this may be a good strategy because the UK is not really in a position to compete this year. EU exports are some 50% behind last year’s figures, so that may explain why wheat prices have fallen so far.
For some unknown reason, China fell out with Vietnam some weeks ago, resulting in China banning pork imports from its southern neighbour. To feed the pigs, Vietnam imports about 4mt soya from Argentina, and at the time of the ban, some 600,000t was afloat en-route to Vietnam. Luckily for all concerned the relationship is thawing, but Argentinean soya premiums (compared to CBOT) hit a low before recovering rapidly.
Argentina was able to win its application to regain access to the EU biodiesel market, so soya oil prices lifted and meal prices relaxed a little. China imported more soya (mainly from the US and Brazil) in August (8.45mt) than the same month in any previous year. China is believed to have imported 85mt to date since October 2016, with a figure of about 92mt expected for the year (ending September 17) which will be yet another record year (see AHDB graph). GM soya is about £290 delivered to the mill.
Sasha Trubetskoy is a student of statistics at Chicago University and a self-confessed geography nerd who makes maps for a hobby. His map of the main roads and cities of the entire Roman Empire is in the style of Harry Beck’s 1933 London Tube map. See the map here.
