Wynnstay, again, lifted its full-year results guidance, citing a “favourable” performance, boosted by factors including elevated fertilizer prices and UK grain volumes which have been backed by a strong wheat harvest.
The UK-based grain trader-to-feed group – which in September said that its results for the year to the end of last month would come in “significantly ahead” of market expectations – on Monday said that investors had still not factored in sufficient upside.
“It is now clear that the group’s results for the financial year will be ahead of market forecasts issued after” the September upgrade, Wynnstay said.
The comment reflected in part an accounting effect relating to a grain price spike on October 31 caused by Russia’s, short-lived, withdrawal from the Black Sea grain deal, which raised the year-end reference value for Wynnstay wheat derivatives.
“These closing reference prices have the effect of generating an additional approximate £500,000 of non-cash reported profit” for the year, the group said, adding that the uplift “simply accelerates the recognition of the fair value from the relevant transactions”.
‘Favourable trading performance’
However, the group also highlighted “a favourable trading performance in the final months of the financial year”, as its core agriculture operations continued to exploit “beneficial” market conditions noted in the September guidance upgrade.
These included strong feed demand, buoyed by elevated milk values and a hit to forage growth from the UK’s dry summer, and a boost to its fertilizer takings from high nutrient prices.
Wynnstay has also benefited from strong grain trading volumes, a reflection of an early 2022 UK harvest, and one which has beaten earlier expectations, backed by a recovery in yields as well as sowings. Unusually, it looks like topping the drought-hit Argentine harvest too.
UK wheat harvest debate
The US Department of Agriculture last week lifted by 800,000 tonnes to a three-year high of 15.40m tonnes its estimate of the UK’s wheat harvest, citing a yield estimate upgraded by 0.45 tonnes per hectare to 8.56 tonnes per hectare.
Output at that level would be 5.5% above the 14.60m tonnes of wheat produced last year, on a yield of 7.81 tonnes per hectare, on USDA estimates.
The AHDB bureau, citing “higher-than-average yields”, has pegged the wheat crop at 15.66m tonnes – up by 12.0% on its dataset.
The UK farm ministry, Defra, has yet to produce nationwide figures, although for England has reported a harvest of 14.41m tonnes, representing an increase of 12.0% year on year.
‘Very conscious of inflationary pressures’
However, Wynnstay was more cautious on its outlook, and left its expectations for the newly-started 2022-23 financial year unchanged.
“The board is very conscious of inflationary pressures for the business, farmers and the end-consumer and of the uncertain macroeconomic background,” the group said.
There is also some doubt over the future of UK milk values, with 2022’s run of price increases stalling in November, when for the first month this year the number of processors keeping their offers on hold outnumbered those giving a raise.
This against a backdrop of falling values, as highlighted by GlobalDairyTrade, with soft Chinese demand and improved European and US milk output prospects blamed for the downturn.
Meanwhile, there are some doubts too over prospects for fertilizer prices, given the collapse in prices of natural gas, which accounts for some 60-80% of nitrogen production costs in Europe.
UK natural gas futures for December closed on Friday at 228.43p per therm, down by almost three-quarters from their August high.
However, the AHDB also noted that “as natural gas prices have been declining over the last couple of months, the price of imported ammonium nitrate has moved sideways, suggesting that global demand for fertiliser remains strong”.
The October price of ammonium nitrate imported to the UK stood at £870.00 per tonne – unchanged month on month, and up 48% year on year, the bureau said.
Wynnstay shares stood 0.6% higher at 633.6p in early deals in London.