Buyers not engaging beyond march

Writers Posted 06/04/19
It has not been possible to persuade export buyers to engage in business beyond the end of March.

Writing this on 25 March means that in this febrile political environment; anything could have happened by the time you read it! What we now know for sure is, the EU have imposed another Brexit deadline of 12 April. While the date has changed, the mathematics have not! The government will need a massive swing to approve the deal on the table. At least nearly everyone agrees that we cannot have a ‘no deal’ crash out that leaves the UK asking for a much longer extension to, or even revoking article 50. I think it was Albert Einstein who said “the definition of insanity is doing the same thing over and over and expecting different results”. I rest my case.

As I have been reporting for months, because of Brexit it has not been possible to persuade export buyers to engage in business beyond the end of March for old or new crop. This has contributed to the big price falls we have seen since Christmas.

But I am looking for reasons to be cheerful! So here goes: After three months of falling the world wheat market seems to have hit bottom, and begun to climb albeit slowly. Why? Well the EU is now catching up with its wheat export programme. At the start of the year it was 27% behind. Now it is only 10%. Give or take any ‘Brexit tariffs’ we are the cheapest source in the world, and our wheat market has fallen a lot less than the USA and EU.

There has been no ‘bad weather story’ on new crop, yet. But, Spain, Portugal and North Africa are very, very dry, with high temperatures affecting all crops. If no rain comes, Spain will need big grain imports for 2019/20. America already had the lowest winter wheat plantings for 110 years! Now, because of snow, ice, flooding in Iowa, Nebraska and South Dakota, its spring wheat plantings are delayed. This may mean less wheat and more maize or soya instead.

As I presaged in February “my gloomy forecasts on barley” have proved correct. In world dollar terms it’s fallen $60 from its high. However, at last some new business has been done from France to China for two panamax size boats (up to 140,000 mt) for March and April. China has some anti-dumping’ issues with Australian barley. So while this is being sorted out, it may be more barley will be bought from the EU. 25,000 mt has also been sold to Tunisia – this is encouraging.

The world’s biggest buyer – Saudi Arabia – has at last come to the party, wanting to buy 720,000 mt of barley for May/June. This is the first tender since November. Saudi buys up to eight million tonnes of feed barley per year. Before this officially only about 3.5 million mt has been bought, so unless they have eaten all their camels and goats they will need more than this 720,000 mt.

The UK barley situation has improved, as DEFRA also overstated the UK barley plantings – by the equivalent of 240,000 mt – so with our exports already at a similar amount, we may have a lot less surplus than we thought.

Old crop milling wheat has continued to maintain a good premium over feed. This is partly due to the fact that imported milling wheat is too expensive. UK millers would be well advised to secure as much UK old crop milling as they can, not least because restrictions upon nitrogen applications, could reduce the amount of German class A 13% protein milling wheat, that can be imported to the UK for new crop.

Now president Trump is off the hook re alleged Russian involvement in the last US election, he will be able to devote more effort to sorting out the China/USA trade deal. China is supposed to have 30 billion dollars ready to spend on grain, soya imports; that would certainly help the whole grain complex.

Tomorrow I go to Warsaw to have the bi-annual meeting with the world’s largest brewers and maltsters, with whom we have enjoyed supply agreements for the past 20 years. When we can resume trading ‘tariff free’, I am confident that we will still be exporting much needed top quality malting barley from the South of England, for new crop, and maybe old crop as well.


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