Growers with milling wheat look set to cash in with premiums of £35-35/t as a shortage of good quality wheat combines with a global oversupply of feed wheat.
The majority of Europe’s wheat looked likely to join the feed wheat market following wet conditions, particularly in France – typically Europe’s largest milling wheat producer, said Mr Doyle, head of exports and risk at Openfield.
Feed wheat would have to compete in a plentiful global market, as indicated by revisions last night (Tuesday 12 August) from the US Department for Agriculture (USDA), which put the global grain crop at 716m tonnes – an increase of 11m tonnes.
Yield in the UK had so far been excellent, said Jonathan Lane, trading manager at Gleadell, with Gleadell revising their UK forecast up to 16.5m tonnes, leaving the UK with an exportable surplus of 3-3.5m tonnes.
The market was still “in a state of flux” while deciding how to settle, with UK feed wheat proving challenging to sell, said Jonathan Lane, trading manager at Gleadell. Futures markets put UK (Liffe) feed wheat for November at £123/t, while the Paris milling wheat price stood at €172.25/t (£137.59/t).
Buyers had taken advantage of France’s earlier harvest, leaving more expensive UK feed wheat with little market opportunity, said Mr Lane. The Ukraine had also sold early to help with cashflow.
“UK feed wheat is about £3-5/t too expensive [to compete with French and German grain],” said Mr Lane, having come down from a pre-harvest differential of about £10/t. “It’s got cheaper but not cheap enough.”
With a more competitive price, France was selling to Spain, Ireland and the Netherlands, typically UK export market destinations, said Mr Doyle.
Globally there was a large price spread, with the best quality milling wheat fetching around US$300/t (about £180/t) while the low-grade feed wheat was making downwards of US$ 200/t (about £120/t).
Since quality was key to price, growers should be making regular tests on their grain, said Jack Watts, lead analyst at HGCA. They should consider the trade-offs of waiting for moisture levels to drop below 15% to enable them to cash in on quality premiums.
“Understand what quality is in your store – sample it and communicate it to your merchant.”