Grain prices steady despite big crop outlook
Wheat prices steadied towards the end of the week despite new and larger European grain crop forecasts.
London’s feed wheat futures recovered a little ground by mid-afternoon on Friday (20 June) to stand at £138.90/t compared with a harvest price ranging from £126/t to £129/t and another £5/t for November.
“Markets have found some support this week on very poor initial Kansas wheat yields and record US weekly ethanol production reminding traders that global demand for cereals remains very strong and the pressure is always on the world’s farmers to keep increasing production,” said Saxon Agriculture in its weekly market report.
See also: US drought gives mixed grain outlook
The development of prices depended to a great extent on how much Black Sea maize would be available to bioethanol plants – maize was still more competitively priced than wheat but the gap had narrowed, said Saxon’s feed wheat trader James Forster.
Analyst Strategie Grains raised its 2014 UK wheat crop forecast to 15.5m tonnes, up from 15.2m last month and 11.9m in 2013. It left its barley estimate at 6m tonnes, against 7.1m last year.
“EU farmers need a weather or political event to turn markets around, which may happen – or may not. If it doesn’t, markets could head lower again.”
David Sheppard, Gleadell managing director
The European Commission’s Mars crop monitoring unit also issued new yield forecasts, putting the 2014 EU soft wheat yield at 5.81t/ha, well above the five-year average, with winter barley forecast at 5.48, against 5.49t last year and a five-year average of 5.30/ha.
Spring barley yields across the community are predicted to average 3.90t/ha compared with 4.43t/ha last year and a five year average of 3.94t/ha while maize is set to yield 7.18t/ha, an improvement on 2013’s 6.69t and the 6.77t/ha five-year average. Oilseed rape yield is put at 3.21t/ha compared with its 3.07t/ha five-year average.
Talk that UK interest rates may rise sooner than expected has strengthened sterling to its highest rate against the dollar since August 2008. It has also breached the 1.25 mark, which was the highest rate at which single farm payments have been converted to sterling (2012), keeping the pressure on UK grain prices.
Increased US and global wheat and corn stocks, good US corn crop ratings and expectations of a good harvest in China are all bearing down on the market while farmers continue to be reluctant to sell.
Strong exports are expected from Romania and Bulgaria but the Australian wheat crop forecast has been reduced on expectations of an El Nino weather pattern.
“EU farmers need a weather or political event to turn markets around, which may happen – or may not,” said Gleadell managing director David Sheppard. “ If it doesn’t, markets could head lower again.”