The strained trade relationship between the US and China is having a fundamental impact on world grain markets, according to speakers at the Grain Market Outlook Conference.
The US Department of Agriculture’s Seth Meyer delivered the keynote presentation at the annual event hosted by the AHDB, which brought together 150 stakeholders from across cereals and oilseeds supply chain.
He said the US would break with the norm of supplying China for six months of the season and was looking to export to elsewhere in the world year round.
Charles Clack of Rabobank added that the 25 per cent tariff imposed on US imports left China in a dilemma about where to source enough soybeans to meet demand – a potential impossibility.
At a global level, drought in key growing regions has been partly responsible for a tightening of the wheat market, with the market also sensitised by the potential for Russian export controls.
And while rapeseed supplies remain tight, with China forecast to import an additional 11 per cent in 2018/19, record soybean production in the US means prices have not seen a significant a rally.
At UK level, the AHDB balance sheet shows wheat production is down five per cent at 14.1Mt and barley down eight per cent at 6.6Mt.
In terms of quality, for milling wheat the feedback from the industry is that functionality is good. The oilseed rape crop is down five per cent at two million tonnes, despite an expansion in the planted area.
However, there is lots of uncertainty at regional level with the Vivergo closure already impacting local prices and logistics and the planned Rank Hovis plant closures likely to do the same.
Animal feed demand is expected to rise following the summer drought and lack of forage, though there are questions around what grains will be used.
Adding to this, the last three months of the season will be post-Brexit and it remains unclear what the trading environment might be.
Helen Plant, AHDB Senior Analyst, said: “The crop size being smaller means we have less export availability for both wheat and barley. In addition there may be a shift in the type of grain we export.
“Spain has been a good customer of feed barley in recent years but it’s currently a net exporter, while drought has affected malting barley quality in Europe so there may be an opportunity there.
She added: “There’s limited opportunity for stock recoveries, because of the size of the harvest.”
Supply chain expert Christof Walter explained how opportunities existed for all players in the UK industry through improved relationships. Good supply chains make more value, he said.
Improving the cereals supply chain would mean collaborating on specifications required by the buyer; building, measuring and improving relationships; making each individual supply chain specific to the customer; and to develop leadership in all aspects of the supply chain.
Summing up, AHDB Cereals & Oilseeds chair Paul Temple said: “We are in a changing world and with our industry’s aspiration for UK farming to be world class, it has never been more important to come together and talk.”