October 27,  2020


AHDB: Global grain continues rally due to import demand from China


Global grain markets continued to rally last week due to continued import demand by China and worries about planting conditions in the Black Sea, South America and the Unites States, the Agriculture and Horticulture Development Board (AHDB, UK) said.


These worries, along with speculative traders continuing to buy into futures markets, continue to drive global grain prices higher.


The planting and early development of wheat crops for the 2021/22 season in the Black Sea and the United States are being hampered by dry weather. Some rainfall is expected in parts of Russia next week, which may alleviate some of the dryness concerns.


Argentina's wheat crop was cut by a further 0.7 tonnes last week (Buenos Aries Grain Exchange) to 16.8 tonnes due to dry conditions.


In Brazil, delays planting soybeans due to dry conditions will likely delay planting of the following (safrinha) maize crop in early 2021. Delays to planting safrinha maize mean there's a greater chance of hot or dry weather when these crops pass through their key growth stages, which could limit yield potential. 


China continues to buy US maize, despite the country having imported or booked enough to fill both its 2020 and 2021 low tariff quotas (7.2 tonnes each). However, there is growing speculation that China will increase the quota, which would support continued high import demand.


For delivered cereals, the balance between the United Kingdom's supply and demand is estimated at 1.08 tonnes in AHDB's 2020/21 early balance sheets, the tightest in decades.


The main reason is the arguably unprecedented year on year drop in wheat production. Imports are forecast at 2.15 tonnes, more than double the 2019/20 level, while demand is lower from the bioethanol, starch, distilling and animal feed sectors. A balance of this size poses challenges to both the industry and forecasting, putting the UK market on a knife edge in 2020/21. 


In contrast, exports will once again be key for UK barley stocks. Barley's large price discount to wheat means that animal feed demand is forecast nearly 0.6 tonnes above last season's record level. However, it's not enough on its own because of the higher opening stocks, very large crop and reduced demand from the human and industrial sectors.


The first official UK supply and demand estimate is provisionally scheduled to be published on November 26, which will give estimates for all cereals.