Wheat prices continue to rise, with UK May feed wheat futures briefly reaching £170/t on Thursday (20 March). By late morning today it was at £168/t in thin trade, with November at £160/t.

Ex-farm prices remain £2 to £3/t higher than the futures market in the North where there is a shortfall, while new crop feed wheat at harvest is worth £148-155/t depending on region. Feed barley is at a £12/t discount to wheat, while November’s prices are about £5/t above those for harvest.

New crop prices are in a narrower range than for old crop, reflecting the expectation that the 19% rise in the wheat area will restore production in those deficit areas.

Ukraine’s ability to continue exporting and crop concerns in important production areas are the main drivers of the recent price rises.

The firmer market has attracted more speculative interest, with funds taking their largest positions in agricultural commodities on US futures markets for three years.

See also Ukraine question makes for volatile grain market

US winter wheat in some regions has been through very cold weather with little snow cover, while continuing cold means less than ideal conditions for corn drilling. Both wet and drought are affecting US and European crops.

However, analysts and traders point out that the firmer market should not be taken for granted.

“Trying to see past the current weather and political issues remains difficult, but with new-crop prospects remaining favourable in the EU and over most of the Black Sea region, one has to wonder if current prices will be justified in the longer term,” said Gleadell Agriculture managing director David Sheppard.

With the confidence of international buyers to purchase further Ukrainian supplies being tested, this could well push demand to other origins and, with a perception that Ukraine’s grain is less accessible to the world market, may maintain price support, said HGCA senior cereals and oilseeds analyst Jack Watts. From a new crop perspective however, the impact of Ukraine was somewhat speculative.

“The depreciation of the Ukrainian currency, despite being supportive to local grain prices, is likely to have pushed up input costs and puts some weight behind the annual question: Is there sufficient working capital to finance the growing of the 2014 crop?

“As this question pops up in most years, the market has a degree of tolerance towards it and so will want to see evidence in the form of production impacts before reacting.”

The Ukraine situation was of greater interest to the old crop position, said Mr Watts. “The new crop market still has the weather to contend with, which has the potential to dwarf the market moving capabilities of the political situation at present.”