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08 December 2016 | Online since 2003
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19 October 2016 08:15:35 |Crops and Cereals,Market Reports,News

Dramatic shift in global supply dynamics 'could add vulnerability' to grain market


Transparency in the wheat trade is gradually being lost, as countries with patchy data increasingly dominate the marketplace

Transparency in the wheat trade is gradually being lost, as countries with patchy data increasingly dominate the marketplace

Grain markets are entering an unprecedented fourth year of surplus but all is not as it first appears, AHDB Cereals & Oilseeds have said.
With comfortable stocks and record production continuing to put pressure on world prices, a dramatic shift in global supply dynamics 'could add vulnerability' to the market.
For the UK, the depreciation of the pound since June has prevented domestic prices from falling as much as global values.
Transparency is gradually being lost, as countries with patchy data increasingly dominate the marketplace.
And though the market is over-supplied on paper, the risk of price shocks 'should not be underestimated', AHDB stressed.
So said lead analyst Jack Watts during his keynote presentation at the AHDB Grain Market Outlook Conference.
The event, themed ‘getting ready for a new agricultural world’ was held on 12 October in the City of London.
In his 2016/17 Grain Market Outlook presentation, Mr Watts demonstrated since the 1972 ‘Great Grain Robbery’, the US has lost significant market share in wheat trade, mainly to Russia and post-Soviet states.
In addition, Chinese figures are skewing perceptions of global stocks-to-use, with a far lower ratio emerging when these are removed from the equation, even more so for the world’s top six wheat exporters.
A poor European harvest against record Russian production also means Russia is set to overtake the EU as the world’s largest wheat exporter.
This may be a warning light to the market in the medium-term given the inconsistency of Russian wheat production, which has varied between 38Mt and 72Mt over the past five years.
Mr Watts demonstrated since the 1972 ‘Great Grain Robbery’ the US has lost market share in wheat trade

Mr Watts demonstrated since the 1972 ‘Great Grain Robbery’ the US has lost market share in wheat trade


UK situation - 'Interesting times'
At UK level, Mr Watts said we were living in ‘interesting times’ from both a market and political point of view.
Last season, markets were driven by high yields and high exports into the feed wheat market but for 2016/17 availability is lower and quality improved.
Based on provisional Cereals Quality Survey results, increased plantings of nabim Group 1 and 2 varieties mean close to 20 per cent of UK wheat is likely to meet minimum bread wheat milling specifications.
But Mr Watts urged caution when looking at the figures. He said: “Protein content is higher but the quality and functionality of that protein is more challenging this season with lower specific weights impacting flour extraction and yield.”
Barley continues its renaissance in the UK, thanks to the rotational requirement for spring cropping and its benefits for black-grass control, a level of production consistency not seen since the late 90’s.
On paper, a large surplus of UK crop looks promising for exports but low specific weights may hamper progress.
What could Brexit mean for cereals and oilseeds markets?
New analysis on the implications of future trade policy scenarios for the UK’s farming and horticulture industries was launched at the event.
The latest Horizon report explores how trade deals with the EU and the rest of the world following Brexit may impact UK agriculture and horticulture on a sector-by-sector basis.
It profiles each sector’s current trading position in the global arena and highlights the opportunities and threats associated with various potential terms of trade.
AHDB’s Head of Strategic Insight David Swales explored these themes in his presentation at the conference.
He also outlined the place of tariffs in contributing to UK competitiveness, the likely impact of any reductions in agricultural support and consumer attitudes to food shopping choices.
He concluded with a warning that: “UK farmers and growers cannot rely on consumers being willing to spend more on British products so the industry needs to focus more on price competitiveness.”

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