WHEAT PRICES have dropped sharply in recent weeks, with traders blaming favourable growing conditions and aggressive selling by Black Sea countries.
Two years ago a large surplus of Black Sea grain forced UK wheat prices below £55/t ex-farm in some areas, and pundits fear the region is in line for another hefty crop this season.
Combined with good growing conditions across Europe, this has slashed UK futures by £7/t over the past month, to £73/t for November.
The US Department of Agriculture expects the EU wheat crop to rise by almost 20m tonnes this year, to 126.5m tonnes.
Production in the Former Soviet Union is also forecast to rise, to 79.3m tonnes – 17.9m tonnes more than last year but still 18% below the record 2002 harvest.
If realised, that would give the FSU an exportable surplus of 6m-8mt, said Gerald Mason, senior economist at the Home-Grown Cereals‘ Authority.
This would compete directly with UK and EU grain, and the UK‘s likely 3-3.5m tonnes exportable surplus would then need to find more demand from third countries, competing against either milling wheat or maize, he added.
Quality of the UK crop would therefore be crucial to market prospects.
“However, given the tight world stocks I would be very surprised if prices did get down to the levels seen in 2002,” said Mr Maw.
Chinese stocks are reported to be very low, and large scale buying would boost global prices significantly.
Meanwhile, old crop prices have dropped by £20/t over the past month, due to a lack of buying interest.
A more balanced supply and demand now means that spot values have stabilised at about £75-£78/t ex-farm, and a late harvest could see prices rise before falling to new crop levels.