Read our commentary on latest developments in the global cereals and oilseed markets.
Please note that from now on this commentary will only be updated monthly. To follow developments in cereals and oilseed markets in the meantime, please see the markets section of the website of AHDB Cereals & Oilseeds.
March 2018 Update
The continued drought in Argentina has led to the Rosario Grain Exchange to cut its 2017/18 maize production forecast to 32Mt, down 3Mt from its February estimate.
The USDA increased its projections for 2017/18 US maize exports by 4.45Mt to 56.52Mt. With Argentinian stocks looking tighter, importers are buying US maize at the fastest pace since the mid-1990s, according to US government data.
Minimal precipitation did arrive on US plains (major winter wheat growing area) in late March. However, according to the USDA, drought conditions in US have reduced the rating of winter wheat crops in key growing states in February. In Kansas, just 13% of the crop is now rated as good or excellent (w/e 23 March), compared to 38% a year ago.
According to UkrAgroConsult, Ukrainian 2018/19 wheat crop is forecast to rise 1% year-on-year, exports are forecast to rise by 0.5Mt to 17Mt. Barley exports are also set to increase by 0.5Mt from 2017/18 to 5Mt.
The continuing drought in Argentina has resulted in forecasts for the 2017/18 harvest being dropped multiple times. Currently the harvest is estimated at 40Mt (Rosario Grain Exchange), a 6.5Mt cut from its February estimate and 17Mt below last year’s crop.
Some rain did arrive in mid-March which provided some relief to the Buenos Aires province. With further rains forecasted in the weeks ahead, it is hoped that these will reach the northern growing regions. However, some soyabean fields are beyond recovery.
The harvest of the soyabean crop in Parana, Brazil’s second largest soyabean producing state got back on track after wet weather in February caused delays. The crop is currently forecast at 113Mt (as of 8 March) by Conab (Brazilian government supply agency). High output from Brazil may compensate some of the impact from a lower Argentine production.
Brazilian soyabean exports will look to capitalise on the reduced Argentine production. In the latest USDA report, Brazilian export forecasts rose for a fifth consecutive month to 70.5Mt.
Spread between UK ex-farm feed barley and feed wheat narrows
The spot premium of UK ex-farm feed wheat over feed barley is currently residing at £7.00/t (as at w/e 22 March). Compared to the same point in 2017 the premium has fallen by £18.50/t, driven mainly by an increase of £17.90/t in feed barley prices over the same time.
In general terms, feed wheat has a higher nutritional value compared to barley. So when the price of wheat is close to that of barley, it makes sense to increase wheat inclusions at the expense of barley, in most cases. In theory, with the premium of feed wheat over feed barley narrowing in the most recent weeks it would incentivise greater wheat usage in animal feed production, at the expense of barley. However, practically there are limits to which this can occur.
Pound sterling has strengthened against both the euro and the US dollar this month, reaching a high of £1=€1.147 (22 March) and £1=$1.423 (26 March) respectively.
Felicity Rusk, Trainee Analyst