Grain trader Claire Strachan takes a look at the current challenges and opportunities with grain values and what 2020 has in store for the market.
Without a doubt 2020 will be a unique year for UK trade and agriculture. As we enter the new year with a Brexit ‘flextension’ date of 31st January 2020, announced just days before the previous date of 31st October, it has left a small window of opportunity for tariff-free export trade for the UK.
How much surplus the UK can mitigate during this period is unknown, however it is unlikely we would see our 2.5mt surplus exported by then. Looking back to the start of the 2019 marketing year the outlook for the domestic grain trade was extremely bearish, with London wheat values hitting contract lows during September.
In October, DEFRA provisionally set UK wheat production at 16.3mt – the largest crop in four years and 20% above last year. Pairing this with the current political situation meant our future with international trading parties and our position under new legislation with potential tariffs left a great deal of uncertainty around what the financial implications would be for domestic values.
Coming into November, trade momentum took a significant change in direction. Persistent rains hammering down across the country are largely preventing the winter planting progress and at the time of writing it is thought that Scotland has planted 90% of the intended area, with England at just 50%. The projected 12mt UK wheat crop is a stark contrast to the prevailing 2019 tonnage which has altered the entire ‘big picture’, with old and new crop values rising £6/t at the start of the month.
So, what’s next for UK wheat trade? With domestic demand estimated to rise 1% this season to 14.8mt, it is likely that we will see 2019 crop carried through to 2020 crop, providing there is the financial incentive for growers. It is likely we will see values going to import parity. The value of UK wheat will continue to be dictated by the following factors; £ fluctuations, global supply and demand, the value of corn as a substitute, and developments in the Brexit saga will also come into play.
It is undeniable that UK wheat prices are likely to be volatile in 2020, which can often lead to producers being caught short. The MSP wheat pool offers a relatively low-risk management approach to grain marketing. The benefit of choosing to market your grain through a pool includes selecting a pool movement period that suits your farm operations; peace of mind knowing marketing specialists are maximising sales transactions combined with futures trading over an extended period; and spreading risk through large combined tonnages, reducing price volatility. The deadline for our 2020 Autumn Pool is now closed, but there is still time to sign up for our Spring and Summer Pools.
Spring (Q1) Pool: January – March 2021. Closure date: End December 2019
Summer (Q2) Pool: April – June 2021. Closure date: End March 2020
If you’d like to discuss signing up for our Spring or Summer Pools, please get in touch with your farm rep, or you can call trader Claire Strachan directly on 01289 333342.