Agribusiness News September 2024 – Cereals and Oilseeds

EU imports rise, exports fall

Earlier reports highlighted the pricing battle taking place between bearish US bumper production estimates and bullish EU and Black Sea harvest results. The US clearly won the first round and prices in the States are now trading at 4 year-lows.

Our markets are tending to resist downward pressure in anticipation that spring crops are likely to disappoint and so potentially strengthen prices. All in all, markets often work in chapters focusing on one thing at one time; in late Spring consideration was given to the EU & Black Sea production risks, and over early summer the focus moved to the bumper US crop estimates, and starting now, there could be some support to prices if markets actually focus on the very poor EU harvest results and downgraded predictions for Black Sea spring crops.

The EU harvest was indeed over-estimated; the EU rapeseed production was well below par and the French wheat crop could be the lowest since 1984, at only 25Mt with an average yield below 6t/ha. Additionally, the German crop will likely be 18.03 Mt, 15% down on last year due to untimely rain leaving disappointing yields and quality.

Although there is much variation across EU member states regarding the impact of the unfavourable weather conditions on cereal crops, a third consecutive cut to the total cereals yield estimates highlights the persistence of the difficult conditions felt across Europe. Furthermore, spring crops all around the Black Sea, from Bulgaria to Russia, have faced hot and dry conditions and the impact upon the sunflower and maize crops will be very significant. For Ukraine too, the negative impact is anticipated to result in a 20% reduction on the initial maize potential.

While harvest concludes on the continent, the European Commission has issued its latest yield estimates for soft wheat, barley (winter and spring), and maize. Overall, the outlook for total cereals remains poor as the yield is estimated at 5.36 t/ha, 0.12 t/ha below the five-year average. All this conspires to decrease EU exports and increase imports.

Harvest 2024

The average reported yield (as per the AHDB’s second 2024 harvest report) for the UK for winter barley, is 6.3t/ha – 11% down on the UK five-year average. Winter malting barley quality is good, although there have been some lower bushel weights and subsequently lower screenings, and specific weights are averaging 64kg/hl across the UK. Nitrogen levels within the winter malting barley samples have averaged 1.5% which is low as maltsters are looking for samples of up to 1.75% and this could affect exports as a higher nitrogen level up to 1.85% is required for continental malting.

Feed barley prices have been relatively immune from the drop in wheat futures markets because of a lack of farm selling and continued demand from the UK compounder. The lack of farmer selling has been stimulated by an early completion of the UK winter barley harvest and buyers have been looking to cover both spot positions and winter positions meaning English barley’s discount to wheat has narrowed closer to £20/t. (£40/t Scotland)

Average yields of OSR across the UK are estimated at 2.93t/ha, down 9% on 2023’s performance. Of all EU27 (plus the UK) Member States, the UK has been the single worst performing country in terms of average yields; average OSR yields in the UK have dropped 10%, (0.36t/ha) during the most recent 5-year period when compared to the previous 5-year average.  The UK will, this year, import more OSR than it produces for the first time ever, a far cry from when the UK was self-sufficient in OSR and had 40% security on edible oils; today that figure is just 20% of domestic edible oil consumption. This move from net exporter to importer is deemed likely to cost £1billion to the UK economy.

Feed beans are still valued at a £40/t premium to London wheat futures and lately there has been some export interest at these values despite the strength of sterling. However, domestic demand is still low as feed compounders view beans as expensive in comparison to other mid-range proteins, such as rapeseed meal and soybeans.

mark.bowsher-gibbs@sac.co.uk 07385 399 513