Farming Consultant, Farming
Welcome to this quarter’s Scottish Farming Update, which is produced by our Farming Research Group and reports on market and administrative issues that affect farmers’ business decisions and on which they may need to act.
Both the USDA and IGC (International Grains Council) are forecasting slight reductions in wheat production for 2018/19, due to lower production in Turkey, Russian and Australia. The latter due to drought which puts their output down to 17 million tonnes; the lowest number since 2007/8. Forecast ending stocks remain stable at around 268 million tonnes (4% lower than last year’s record stocks).
Maize production forecasts also remain relatively stable, with lower than anticipated harvests in the US and Russia, but a larger crop in Ukraine. Consumption estimates have risen, which leads to a fall in forecast ending stocks to 267.5 million tonnes: 14% below their opening estimates for this year.
Overall, forecasts of global production and ending stocks for grains remain relatively benign, with generally good planting and winter growing conditions experienced so far in the northern hemisphere, and in the southern hemisphere drought issues in eastern Australia were balanced by good conditions in South America and South Africa.
The latest report from the Agricultural Market Information System (AMIS), (a collective assessment of the market by ten international organisations in place to track and analyse world food production & prices) describes how market analysts are reacting to China’s revised grain production estimates, published in late 2018. The revisions relate to every year between 2007 and 2017 and cumulatively increase China’s wheat production by 312 million tonnes over that period; to put that into context China’s 2017 wheat production is estimated at about 250 million tonnes. As there has been no corresponding revision in China’s consumption figures, the extra production has had to be provisionally added to their ending stocks records, but there is concern that this may not reflect the true position. The report highlights the risks that poor quality stocks data presents to the international community as it can lead to unexpected price swings, as seen ten years ago. As such it advocates putting in place a long term solution of survey-based approach to stocks in the main grain producing countries; something that will be difficult to implement.
The USDA reports global oilseed production up marginally to 600.5 million tonnes, and higher soybean production in Brazil and Nigeria outweighs a reduction in oilseed rape production in Australia and India. Stocks remains well supplied, with AMIS reporting that ending stocks in 2019 will be one third greater year on year.
The UK wheat values have remained stable due to the combined effect of the stronger Sterling preventing a hike, and reasonable export progress preventing a slide in prices. Feed wheat markets appear to be slowing down in the lead up to the intended Brexit date on 29th March, and several merchants are of the view that price falls are almost inevitable over the coming weeks.
Market prices for feed barley are still holding up, but tend to be less buoyant than wheat. Malting barley premiums remain around £25/T but selling malting barley forward for April and May is difficult as end users wait to see how Brexit plays out. Domestic maltsters are limiting their purchases to short term requirements, so as to avoid carrying large surpluses. Their rationale being that in the event of a ‘no-deal’, domestic prices are likely to fall sharply due to the practical and financial difficulties of exporting to the EU.
Thanks to a largely domestic market there is less vulnerability to the impending trade disruption this spring for Oilseed Rape, and it is holding onto value well as a result. Australian canola continues to be imported into the EU which will keep a lid on prices. Fluctuations in currency may provide the best selling opportunity for farmers who still have crop to sell.
Also in this quarter's update:
- 2019 Crops
- Fertiliser & Fuel
- Policy and regulation news
- Farm Business News.