Well, after 31 months of ‘negotiating’ Brexit we now have only 88 days left until we leave the EU forever, and almost nothing has been finalised or agreed! During this time the other 27 EU members have managed to reach agreement on what they want to achieve from the UK ‘Brexit deal’. But we have failed to do the same.
There seems to be no hope of parliament reaching a majority decision on either accepting the EU deal on the table; or indeed any of the current alternatives being discussed in the House. Does this mean the country will have a second referendum?
It must surely be clear to anyone – who isn’t comfortably off, retired with an index linked final salary pension – that the ‘no deal’ or ‘hard Brexit’ option is nothing but a huge disaster waiting to happen! The UK economy is already in poor shape, with well-known high street retailers posting profit warnings. We have heard what the Bank of England said regarding unemployment, falling house prices, rising inflation and interest rates. Yet there are still those out there, talking about going for a ‘no deal’ divorce with the EU.
There is still much bullish talk about UK exporters accepting WTO (World Trade Organisation) tariffs, and carrying on with exporting to the EU and the rest of the world! Really? Have they looked at the scale of the tariffs? About the only UK export product that could survive WTO trading terms is Scotch whisky, and that’s because its a premium product that has the world market to itself! I wouldn’t put UK malting barley in that bracket.
So our export business beyond the end of March has stopped, as has all new-crop export trade. We have EU buyers who want to buy our malting barley but its too risky, as they don’t know what the final price could be.
It really is fortunate that we don’t have a big exportable surplus of malting barley or wheat in the UK if we did, we would not be enjoying our current high ex farm values.
The UK grain trade is normally quiet at this time of year but its slightly worse than normal as end users are full up with stock, which is not surprising as we had about a full year’s feed wheat import programme during the first four months of the year!
Cheap maize has also been coming in and displacing further wheat in feed rations. Without hard winter weather the compound feed trade is slow. Also farmers are sitting on their remaining small balances as they are in other part of the world. I don’t blame them for that.
If our parliament should go for the ‘self destruct’ – ‘no deal’ Brexit, sterling could be devalued by 10% to 15% (as it was when the ridiculous referendum vote went the way it did). Because, even if the world is coming to an end as we know it, you should still have the comfort of your grain appreciating a few pounds per tonne!
In the wider world the trade still believes that the USDA global wheat production may have been overstated by 30 million tonnes! That said, the alleged 260 million tonnes of world stock is giving comfort to the big international buyers. But make no mistake, the world could afford one poor harvest – which we just had – but another consecutive problem would cause quite a panic, and rising prices.
The good news on that front, which I trailed last month is the wet weather in Argentina. It’s carried on raining in the north east all through harvest. They don’t have the infrastructure to deal with excessively wet harvest weather without serious impairment of yield and quality. Australia is also very wet in the east and south east. Maybe El Niño is returning to haunt the Pacific Rim. On a positive note, our quite good ex farm wheat prices are still some £15 per tonne cheaper than imported wheat over April to June. So that’s quite a gap ‘between the wallpaper and the wall’, and would allow some increase in domestic values before imports could figure.
There are rumours that the UK has planted every possible acre with winter wheat. If that was the case, you could be looking at a return to the record 16 million tonne crop we had in 2015. But all of that is a long, long way ahead. I am expecting at least two spikes on new crop, one because of Brexit, and the other a weather event, probably drought in European/Russian spring planted crops.
My new year wish has to be that our parliament does not accept the ‘no deal’ – ‘crash out’ option. Almost anything would be better than that.
