Banks Look Into 2013

26/11/12 -- Come on then, who ordered all this rain? I think it must have been a fat finger trade. A bit like when MrsN#2 worked at Tesco's on the home delivery jobbie and an order would come in from somebody who's ordered 8 kilos of bananas online. Nobody it would seem thought to check whether this order had come from the zoo before sending somebody out onto the shop floor to strip the shelves of bananas. Of course invariably the customer wanted 8 bananas not 8 kilos of the wretched things and would look on aghast as half the Windward Islands came down the drive.

Well that's exactly what I reckon has happened with this rain. Someone has been working out how much we need for a nice wheat crop in 2013 and have ordered it all to be delivered in November 2012 by mistake, completely forgetting to put a tick in the equal monthly quantities box.

Farming Online said last week that they reckoned only around two thirds of the intended 2013 wheat crop was in the ground. Origin Enterprises estimate that "poor weather has prevented UK farmers from sowing 30% of winter crops," according to a story on today. Note that's winter crops not winter wheat.

All of which seems to tie in rather nicely with the general vibe I've picked up on across the last few weeks talking to farmers all down the eastern side of the country from Suffolk to Market Rasen to Newcastle.

Which throws up far many more questions than answers. Like what are UK farmers going to plant for 2013? And when? Spring barley? Not me, every bugger is gonna plant that has been a common response. Spring wheat? We don't really have any figures on our normally miniscule spring wheat acreage in the UK, but it looks a certainty that we'll probably grow far more of it than normal in 2013. What else? Beans? Peas? Linseed? Spring OSR? Oats? They all get a mention, depending on which part of the country you are in. In fact bananas is about the only one I haven't heard get a mention lately.

It's particularly interesting then to read today that HSBC are forecasting a UK wheat price of GBP165/tonne for the 2013 crop, according to various media reports. Having done a fair bit of internet foraging I've managed to find a copy of their interesting and in depth Forward Planning 2013 publication here.

On a scan through it's 35-pages I can't actually see that they (sensibly) whip out their gonads and place them on the chopping block and say "feed wheat will average GBP165/tonne for the 2013/14 crop year." What they do say is that they have set the (feed) wheat price at GBP165/tonne for the purposes of their costing illustrations which they admit "may seem conservative compared to spot prices" but that they expect 2013 to have "fewer unseasonal weather patterns." A bank that can also do weather forecasts, great!

They do specifically forecast one thing though "that the euro will strengthen through 2013, to reach 87 pence this time next year" against the pound. That's around 7.5% higher than the current exchange rate of just under 81 pence.

If they're right, then current levels offer a great opportunity to sell some wheat at around GBP20/tonne over the market based on the current Nov13 futures price. Personally, I don't think that they are right but even so fair play to them I say, a bank with bollocks. Now, where did I put that meat cleaver...

Incidentally, they aren't the only bank that's looking for downside movement in 2013. Saxobank say that they are "outright bearish" on the Ag Sector. See here (you'll need to scroll down to P14 onwards).