May 1, 2020

 

UK's April wheat prices remain relatively firm

 

 

Despite pressures from the COVID-19 pandemic, UK wheat prices overall remained relatively firm throughout April, reported AHDB.

 

One of the main factors negatively affecting markets has been falling demand for corn from the US ethanol industry. This has pulled down US wheat prices. However, European wheat markets have seen increases over recent weeks as some Black Sea countries moved to impose wheat export restrictions.

 

The closure of many food service outlets both here in the UK and globally has affected the demand for wheat. A knock-on effect on demand for meat has also been seen, especially due to many events, including the Euro-2020 football championships, being postponed. This has pressured grain prices to fall due to the increased supply of grain available.

 

The April USDA supply and demand estimates detailed an increase to ending stocks for both wheat and corn, as a result of reduced consumption figures (see above). As mentioned previously, reduced demand for US corn from its ethanol sector has impacted global grain markets. This unexpected additional supply of corn will add to the global surplus of grain available for animal feed throughout this year, which will keep pressure on feed grain prices.

 

Southern parts of Brazil have been without rainfall for much of April, this dryness has also affected Northern parts of Argentina. Though it is a little too early to tell if there will be an effect on corn yields, it remains a watch-point nonetheless as any downward revisions to production figures will offer support to prices.

 

Dry conditions have persisted for much of Ukraine and parts of Southern Russia. Crop conditions are relatively unfavourable as a result. There has been some rainfall in recent days, but the volume has been below required levels. The UK imports large amounts of feed grain from Black Sea regions, so reductions to final production figures could lead to increases in imported grain prices.

 

Planting of corn and soybean crops is underway, and usually finishes in the later weeks of May. Conditions are currently favourable and large areas of both are expected. Some corn area could be switched into soybeans, covered below. However, plentiful stocks of corn are likely to remain in the US.

 

Looking at the UK, one developing issue throughout April was the lack of rainfall. The brighter weather enabled many growers to get on well with spring planting. However, the start to the silage season is beginning to see some effect from the dry weather. As of 27 April, seasonal grass growth data (kg DM/ha) dipped below the previous two years after trailing just 2018. There is rainfall expected in the near short term, which should alleviate some worries.

 

Global oilseed prices continued their downward trajectory from March, pressured by the fall in demand for transport fuel. The International Energy Agency (IAE) expected demand for oil in April fall to levels not seen since 1995. There are knock-on effects on the vegetable oil sector, as some supply is used to create biodiesel. In March, the temporary closure of some bioethanol plants in the US affected the supply of the by-product dried distiller grains (DDG), a common feed alternative, this increased demand for soymeal.

 

In April, we have seen soymeal prices fall back from high prices seen in March. As the UK is a net-importer of soymeal and other high protein feed, the declines have helped some livestock producers and feed manufacturers. On 27 March, delivered (48% Pro) soymeal was quoted at GBP375.00/tonne for May (ex-store Liverpool). As of 24 April, the same price had declined GBP58.00/tonne and was quoted at GBP317.00/tonne.

 

An important watchpoint for the next few weeks is the US planting figures. The forecasted soybean planted area is 33.8Mha, up 10% on last year when heavy rainfall limited the area. However, the reduction to corn demand for bioethanol mean some farmers could increase their soybean acreage at the expense of corn. As of 27 April, 8% of the US soybean crop has been planted, versus the 4% five-year average for this point.