The tragedy that is the war in the Ukraine has had a massive impact on so many aspects of our collective lives and seems set to throw a shadow over local and international markets for almost everything for many months to come. As we contemplate the impact on the market for pulses, we retain in our minds the horrors being experienced by those wrapped up in the more immediate and direct impact of the violence.
Grain commodity markets of all types have been on an upward trend for a while and in recent weeks that upward spiral has created trading conditions that have been unlike anything anyone can remember. Markets already having been distorted by the impact of the pandemic, with supply chains struggling to readjust and absorb multi-fold increases in the cost of international shipping, are already being impacted further by rising fuel prices. From a significantly reduced pandemic low, global oil and fossil fuel production was struggling to bounce back as quickly as demand before the conflict began. Fuel prices have rocketed further under the international sanctions imposed upon Russia and there are suggestions that this is now starting to have an impact upon the very viability of some domestic hauliers which, if a reality, could have significant implications for continuity of a smooth domestic supply chain and potential for still further rises in haulage costs ahead.
More than one country – including Egypt has banned food exports, fanning further the flames of doubt and negatively impacting supply chain flows.
With UK food security already being a hot topic in the rather polarised ‘production versus environment’ debate the emphasis of the discussion now appears to be swinging towards ensuring that maximum food is secured locally but utilising more environmentally sustainable techniques. Which for many, is where the focus should have been all along.
With input costs rising dramatically and a clear focus on nitrogen fertiliser, pulse crops are receiving significant additional attention in recognition of their zero requirement and multiple environmental benefits from their production.
The impact of this for the UK crop 2022 is probably going to be negligible, as a kind and open autumn permitted a much larger area of winter sown crops to be placed, which were already well established before the greatest of the market impacts were realised. However, with the knock on effects likely to last for months if not years there is considerable potential for pulse crop 2023 to rise significantly as a result.
Domestic drilling of peas and beans is well underway and spring conditions so far have generally been excellent. Winter sown beans almost universally look good.
The prediction of a large Australian crop came to fruition and availability has, as it always does, slowed down food grade exports from the UK. Domestic logistics issues however continue to dog Australian exports potentially giving the UK an opening to act opportunistically for smaller shipment requirements.
The value of old crop feed beans has of necessity followed the wheat market, although the premium over wheat appears to have been eroded a little and they seem to have at least temporarily, entered into their own market.
Feed bean values are in the region of £310 /t ex farm.
There is some continued domestic demand from local feed producers who, with the rising costs of alternatives such as rape meal which are currently looking dear, are seeing advantages in using UK produced ingredients.
For those looking to sell crop 2022, offers can be found with a premium of about £25-35/t over November wheat futures. Outwardly this would appear to present a good opportunity but with so much uncertainty it is questionable whether the premium is high enough to establish business. There is currently no trade, with few growers chancing the forward sale of an unknown crop size. As a result, the outlook may well remain static until much nearer to harvest.
Further adding to the mix of complications for human consumption, the main market Egypt, has recently devalued the local currency by 20% and whilst they still need to buy staple foods, bean stocks are currently high and well supplied by shipments that have arrived from Australia.
Having peaked at around £330/t ex farm in early January, there is now effectively no trade or premium for human consumption grade beans, which is leading to a refocussing on the potential opportunities in European feed markets.
If there is a return to human consumption exports before harvest it is likely to be after Ramadan in later May / early June, but this is far from certain.
While export demand for old crop has slowed it has until recently been excellent.
UK Combining Peas
Although the story is of blocked ports on the Black Sea and the inability of produce to leave the region, the reality is believed to be that there were few peas left to export.
European users tend to prefer peas for feed due to their generally more consistent availability. The situation is now being seen as a driver for the feed pea prices in Europe, presenting a potential opportunity for UK pulse exporters. There is considerable uncertainty over spring crop drilling in the war-torn region.
Old crop contracts have been put under considerable pressure by recent events and whilst some have been able to offer a little additional value to growers in the light of rising commodity prices the vast majority of contracts are sold forward at fixed prices leaving little room for manoeuvres. In these very unusual circumstances free market producers may have benefitted.
With planting well underway there remain few if any contract opportunities for 2022 but it is worth asking.
Feed quality peas are thought to have a nominal value at a small discount to feed beans but there appears to be something of a false market and in reality offers might be accepted in the region of £284/t ex farm.
Massive uncertainty means a crystal ball is required to guess the prices that might be available in 12 to 18 months time.
Some contract opportunities remain available for crop 2022.
Marrow fat peas
These were very short in 2021 and it was flagged early on that open market peas would appreciate in value. As a result contract values increased significantly for crop 2022.
There are no offers coming forward to the trade. Good quality samples have fetched up to £550/t ex farm.
Crop 2022 is contracted to much nearer anticipated demand but is still slightly shorter than intended. Seed availability has had something to do with this, but so has the open autumn and alternative planting decisions by growers.
Few if any parcels have been offered off farm in recent weeks, indicating that there is little if any left to trade. Values may have peaked at up to £320/t since the New Year.
Only Mantara is being offered to the trade and there is really no demand. It appears that off contract, this type has been over produced for it’s main market (racing and domesticated pigeon feed) and there are few takers in alternative outlets.
Variety Rose appears to be unavailable – export consumers prefer this higher premium variety for human consumption qualities.