Poor margins, EU farmers anger: higher prices are part of the solution.
The current situation is not looking bright: prices are low, production is at risk, costs of production remain elevated, cost of money has soared. In this context, EU farmers are protesting against environmental norms and free trade agreements that directly hurt production margins. They want less regulation and higher prices. Keeping a close eye on market prices, making informed decisions to catch a potential rebound is certainly part of the solution for higher margins in 2024.
It is clearly a transitional period for UK farming. We had two good years in 2022 and 2023. This coming season will probably be more difficult, but we should value our business over a 5 to 10 year period. Our markets are cyclic. We have seen in recent years how rapidly our market can change. A price rebound is always possible. No doubt, better times will return as markets will need to pay for farmers to plant!
This raises the question of prices. Grain prices continued to fall in 2024. They are currently trading close to the season’s lows again, amid large supplies and sluggish demand. However, we will follow some key and potentially positive price influences:
- Brazil: the USDA may well be over-estimating both soya and corn production by 10 to 20MT. Our ‘boots on the ground’ contacts continue to report lower corn area and soya yields. We will have a much better view as soon as the end of February!
- Black Sea supplies vs EU exports: for the first time since August, this week, some French wheat was sold to Egypt and Algeria. EU wheat is now slightly cheaper than Russian wheat. We need strong EU exports to support MATIF (and thus LIFFE) prices again. The switch from Russia to EU demand is slowly but surely taking place. The war could also have a geopolitically positive impact if the Kerch Bridge were to be destroyed.
- US spring planting season: it is traditionally a very volatile period. As soon as March, not only weather conditions will matter in addition the market will scrutinize US farmer planting intentions. Here, prices are already below costs of production (US corn COP estimates for 2024: between Cts450 and 515 per bushel).
All in all, prices are clearly low. We will remain a bit more patient to sell our remaining old crop stocks. Probably until early March as our network in Brazil tells us a very different story than that of the USDA. Any rebound will be a selling opportunity.
In this bearish but uncertain context for world supplies, don’t miss our Farmer International Conference on February 7! Farmers from all around the world will provide some important answers for the near future...
Sebastien Mallet / ODA UK - CEO
sebastien.mallet@oda-agri.com
Main Office: +44 1223 894 791
Mobile: +33 6 82 83 71 87