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Layout 3 07/03/2011 16:02 Page 1 Dewing mag 4pp:Layout 3 07/03/2011 16:02 Page 1 Dewing Grain Newsletter Spring 2011 Wheat A year ago I was preparing a talk for the Anglia Farmers Conference in Norwich. The message was clear – prospects for another large crop following two record breaking crops spelt lower prices and increasing stocks (wheat had recovered to a 30% stock-to-use ratio). The theme was selling and if the ‘big thing’ happened, either ‘cash settle’ your sales or buy options. The big thing turned out to be a major Russian drought, taking the lowest priced wheat out of the export markets; add that to a number of small significant events like UK yield down 10% and values have doubled. So what happens next? In our opinion, the UK has a problem with supply for July. Exports will have cleared over 1.7 million tonnes by the end of Feb and imports will be needed to supply the July demand. What can come in and at Malting Barley what price? It is looking more than likely that we will be seeing Australian feed Prices for harvest 2009 wheat (low kg rain damaged) because it is cheap and there is plenty of it. The timing of those trades will probably create a bearish market movement, so were so low that farmers watch out for it, although we may need a higher price before those trades opted for other crops. occur. We calculate after all the costs and current currency rates that Australian wheat would cost £230 delivered to the consumer on 63kg basis. The brewers who have control of the As we know, the UK consumer reckons the reduced feed value of lower kg market did not believe the Maltster or wheat is £1 per kg to 70kg and below that is £2+ per kg. I wonder if these Grain Trade when they were told that calculations might be ignored on this occasion!! Whatever, the timing is going growing barley represented too big a to mean extreme brinkmanship for buyers and sellers of the remaining risk and probably a loss. The choices untraded tonnage. for farmers have improved and if At this point new crop must come into the equation. We believe that the barley could not guarantee a profit growing crop has had enough weather problems to limit production to a other crops like OSR were much breakeven in supply and demand - assuming good weather through from now. more attractive. In 2007/08 growing season there was a perfect autumn, winter and spring Following the reduced plantings for which brought the record 685 million tonne crop. The droughts in Russia, US 2010 and the extreme increase in Midwest and China have already reduced potential. If another issue occurs feed grain values, the year end stocks (winter kill - different sowing conditions for spring crops) conditions are perfect of barley will be minimal and the for a price explosion. Current 2011 values are £30 discount to 2010 levels! If planted acreage for 2011 is a further 2011 gets the chance to rally, 2010 stocks will be kept by governments for 2% lower. Therefore, premiums have food security and an already volatile market will be hard to buy. On 2011, you improved on top of higher feed need to sell the grain and buy a call option against it, securing a minimum values. If the UK had an easy price whilst allowing you to still be in game if the next ‘big thing’ happens and autumn, wheat plantings would have we are nearer £300 tonne! increased and spring barley would have probably seen a reduction in acreage. Unfortunately, potatoes and sugar beet have not been lifted and the spring barley acreage will increase. We believe there will be enough extra acreage to reduce the malting premium, but we also believe the potential for feed grain price improvement should give growers enough coverage to help some of their tonnage unsold leading into harvest. Old crop spring barley is trading at £200 ex farm. Dewing mag 4pp:Layout 3 07/03/2011 16:02 Page 2 Oilseed Rape The market for rapeseed has seen a tremendous bull run over the last 6 months, with strong gains initiated by the increased demand for rape oil (bio-fuel) and the dramatic drop in production. Firstly, in Eastern Europe, drought saw rape yields cut sense have prevailed, as any move to dodge the inclusion followed quickly by flooding in Canada and then further levels would probably lead to more political interference in a crop damage due to heavy rains in Australia. This has seen market already constrained by increasing regulation. This the recent rally of OSR take Matif futures to over €520 per has been quickly followed by more favourable weather tonne on the front month. The heady heights of this rally conditions for South American soya crops. were short lived as the market was aggressively sold off, as The basic fundamentals for veg oil demand have not traders protected profit and nerves set in around the high changed, demand is still healthy and stock to usage ratios prices reducing demand. The very high methyl esther globally will be 9.3% for rapeseed and just over 5% for the prices were at levels that made many bio-fuel producers EU 27. This means we need to see a solid production consider taking the penalties for non-inclusion of the figure in 2011 to reverse the long term price direction which renewable oil. However, a market drop and common is currently still upward. Organics The bullish sentiment of the conventional market holds considerable support for the organic sector. Consumers have strong demand for organic grains with particular emphasis on traceability from farm to fork with assurances of quality whilst seeking a local product to satisfy local demand. The industry is in the process of Federation and will be available for launching - ‘Why I Love Organic’ - a organic intake for this year’s high-profile three-year campaign harvest. This is a significant exclusivity highlighting to us the level highlighting the benefits of organic achievement for the store and to the of demand. This interest has food, which aims to increase best of our knowledge it is the only sparked discussions about setting consumer demand across the UK. facility in the region able to offer up a producer group; the group It is reported that sales figures are organic storage to farmers. For this would seek to manipulate cropping increasing which is great news for harvest there is 660 tonnes of to grow the most lucrative crops the organic sector demonstrating organic capacity and we’ll be whilst satisfying the demands of the that consumer confidence is looking to increase this to meet consumer, thus creating a strong returning and that the sector is demand once we’ve completed the bond between consumer and looking forward to growth again. expansion programme for the site. producer. As it has been identified Yaregrain - the newly formed grain We have had both local and national by consumers as a rare facility store, based at Cantley, Norfolk has organic consumers interested in guaranteeing a quality local product, recently achieved Organic establishing supply agreements ex we anticipate being able to achieve Certification from the Organic Food Cantley, with a number requesting good premiums for store tonnage. Dewing Grain, Banningham Road, Aylsham, Norfolk NR11 6LP. T: 01263 731550 E: [email protected] W:www.dewinggrain.co.uk Dewing mag 4pp:Layout 3 07/03/2011 16:02 Page 3 Dewing Grain Newsletter Spring 2011 STORAGE We are pleased to announce that Yaregrain plc has received commitments of nearly 10,000 MT as well as achieving our objective of creating a farmer owned business. Yaregrain has surpassed the minimum threshold set out, therefore phase one of constructing additional capacity and advanced processing facilities as well as accommodation in The Yaregrain directors which to house a new trading office will satisfy the grower’s requirements, ‘A’ share investment (business commence imminently. including recent developments ownership) is complete; however the establishing a supply agreement for directors of Yaregrain are seeking Yaregrain’s main objective is to Canadian red wheat ex the store. additional B shareholders provide members with access to the Also, (as detailed further in the applications to join as a store wider markets, whilst guaranteeing newsletter) Yaregrain has achieved member by offering the second quality to the end user and organic accreditation with the tranche of shares at an attractive importantly eliminating the risk to the Organic Food Federation. The other level. farmer of grain being rejected or further development is that the In terms of tax advice please seek premiums being eroded on intake business has received EIS approval professional advice, although for any due to specification. The facility is and therefore holds several tax other enquiries or for further geared up to handle all crops to incentives for investors. information please contact us. Honingham We are pleased to announce a new storage agreement with Honingham Thorpe Farms. Jamie Lockhart, the store manager is working closely with our storage advisors in order to achieve the TASCC standard for the site with a view to registering the site as a ‘Futures’ store. Any farmers local to the Honingham site may be interested in delivering their wheat instead of receiving the lower ex farm value. Please speak to Ian Webster on 01263 731550 for further details. Salle Again we will be in-taking OSR into Salle for this coming harvest. To help relieve harvest pressure and to extend the marketing period for your selling we are able to offer storage deals through to May.
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