Monday Market Briefing - 18th October 2021

Similarities are being drawn between Harvest 2012 and the current season. In 2012, we had comparable UK crop conditions with a lack of grain fill due to dull, cool weather throughout the spring affecting bushel weights. However, the price driver in 2012 was one of a lack of production. The US corn crop lost 40 mln MT and the Black Sea wheat production figure was 38 mln MT lower than the original forecast. The chart below shows the rally into harvest 2012 (black line), before continuing through until end-2012 (green line). Ultimately, higher prices led to an increase in planted area for the following season, but also caused demand destruction – pushing the mkt lower into 2013. 

This season for Harvest 2021, global supplies of feed grains are healthy, and instead we are experiencing a demand-led rally (red line). As the world wakes up from 18 months in Covid lockdown, countries that consume huge amounts of commodities hope to revert their demand to normal - almost overnight. The supply chain infrastructure (haulage, staff, fuel stocks, etc) during the past 18 months has shrunk, and does not have the same ability to get goods from point of production, to point of consumption. For UK grains, the shortage of lorries, ocean freight availability and port staff slow the export process for buyers in Spain, and therefore demand is not satisfied, and prices go up. 

This season’s current prices should hold for the short-term while demand remains firm, but will stimulate planted acres for next year. 

Have a good week.