Milk Manager News July 2022 – Straights Update

Straights prices for delivery in artic loads as of early July are shown in the following table (varies depending on location). Note that prices are volatile and can change quickly:

Sources: SAC Consulting, Straights Direct, AHDB and Graindex. Prices do not include seller’s margin.

Global News

• World cereal stocks continue to tighten but the last seven weeks has seen a continuing market correction downward for cereal grains with wheat losing 28% of its value over this period and now trading at £254/t on the Nov ‘22 LIFFE Futures on 6^th Reasons are multiple:
  • Harvest is now underway and making good progress in the larger-exporting countries in the Northern Hemisphere and prospects look good for US, Europe and Australia.
  • Russia has large stocks and is trading heavily, (both their own and apparently some of Ukraine’s) – the world needs Russian wheat and the Russians need to sell it, albeit at a lower, more affordable price into those reliant and less developed countries; this is putting a floor in the market. Russian wheat production estimate is reported to be at a record level of 89.2mT. However, its export capabilities could be hampered by access to shipping as a result of increasing economic sanctions, as well as shippers reluctant to enter waters near military conflict areas.
  • Intense inflationary pressures on beef margins are perceived as likely to reduce feed demand from the livestock sector going forward.
  • Fears of a recession reducing consumption is encouraging hedge funds to liquidate their long positions.
•  Ukraine’s estimates for wheat have increased from 17.1mT to 18.2mT and for maize from 48.3mT to 52.4mT. However, exports from Black Sea Ports are questionable in the short-term due to more damage to grain silos and export terminals taking place at the end of June. There is also news around an export corridor for Ukrainian grain had added pressure to global grain prices. One of Ukraine’s deep water export ports, Mykolaiv, is now unusable after Russian bombardment. Along with the port of Odessa, these two ports would normally handle 35% of Ukraine’s grain exports.
• Updated figures from the USDA on 30^th June for US planted acres of wheat and maize showed that the maize planted area was back from 93.357million acres to 89.921 million acres, roughly what was expected. Wheat acres were slightly higher than expected at 47.092 million acres. However, stocks were significantly lower than last year at just 660 million bushels or 17.94 million T (versus 845 million bushels or 23.0 million T).
• The EU 2022 wheat crop is expected to be at least 6mT less than the 2021 harvest and the current hot weather could see further crop estimates reduced for France, Spain and Hungary.
• The oilseeds markets look to be in a more favourable position for the 22/23 year, with European rapeseed and Canadian Canola production estimated to be up by 1.2 mT and 7mT respectively for this year’s harvest. Although global year end stocks are expected to increase by over 2mT, price volatility could continue this year due to the stocks-to-use ratio staying fairly tight at 10.7%. On the other hand, soyabeans are thought to have a much more comfortable stocks-to-use ration of 26.3% by the end of 2022/23 and year end stocks have risen by over 12mT.

UK and Scottish News

• The AHDB Early bird survey indicates a 5% rise in the area of winter cereals for the UK harvest 2022 compared to last year and whilst the spring barley area in Scotland remains static, elsewhere, the harvested spring barley area is expected to be 8% down on 2021.  Closing stocks of barley for the 2022/23 season are therefore expected to contract, and wheat to remain at similar levels. Ex farm wheat and barley prices as of 6^th July are as follows:

Source: SAC Consulting, AHDB and Graindex

lorna.macpherson@sac.co.uk; 07760 990901

mark.bowsher-gibbs@sac.co.uk; 0131 603 7533