Last week’s release of highly anticipated data from the USDA (published last Thursday) brought mixed messages.
While global grain markets were supported by the news that this year’s US winter wheat area was forecast at a 100 year low, upward revisions to global end of season stock estimates limited upward movement.
According to the latest data, the amount of winter wheat which is currently in the ground for harvest 2017 is at the lowest level since 1909 at just 13.1 million hectares. This is a 10% reduction on the previous year – at the time, maize corn was a more profitable option.
However, with the way the economics are stacking up this year, it is expected that many US farmers may chose to plant more soybeans at the expense of wheat this year.
In areas such as Kansas and Oklahoma which are both major US winter wheat producing states, we could see an increase to soybean production by as much as 25%.
Although the above may seem like a boost for the market, the figures are essentially regarding a crop which hasn’t even been harvested yet!
For now, the market appears to be more concerned with the estimates for the current 2016-2017 trading season (and understandably so).
In this month’s supply and demand report, the USDA revised this season’s global wheat closing stocks at a record 253 million tonnes – this is a staggering 12.8 million tonnes higher than last seasons closing stock figure. Key drivers for the increase include lower domestic demand alongside an increase to production for both Argentina and Russia.
Speaking of Argentina, it is important to recognise that the report made no alterations to this year’s soybean crop. Over in Brazil, this year’s production figure was actually increased by 2 million tonnes since last month to 104 million tonnes. Perhaps those weather rumours that littered the market place over Christmas were a little over played after all?
Meanwhile, currency fluctuations have added massive volatility to the market this week.
Decisions regarding both Brexit and the UK’s place within the single market alongside the imminent inauguration of Trump have caused havoc regarding the value of the pound.
Feed wheat for spot collection is currently valued in the region of £150/T ex-farm whilst movement into the summer months should make £155/T ex-farm.
As for feed barley, the market doesn’t appear to be altering despite the recent rally within the wheat market – £125/T remains a realistic offer for May collection.