Reports of massive US soyabean and maize plantings knocked over £1/t off UK wheat futures early this week, putting July at £98.90/t and November at £102.25/t. The effect on French wheat futures was similar.
Chicago maize futures fell 2.5% to a six-month low on the news, which also sent soyabean futures down 4% and wheat down 4.2%.
The US Department of Agriculture’s annual prospective plantings report put this spring’s likely maize drilling at 35.94m ha (88.8m acres), the second largest area since 1946. At 31.6m ha (78.1m acres), the soyabean area will be a record.
Plantings of both of crops will rise at the expense of wheat, which looks like falling 9% to 21.8m ha (53.8m acres), in line with what the trade was expecting. Actual areas will be confirmed in late June.
The release of the highest maize stocks figures since 1987 added to market pressure. World grain stocks are at an eight year high following larger areas sown on the back of the 2007/08 price spike and the International Grains Council forecasts world wheat production in 2010 at 657.5m tonnes, the third largest on record.
There were no massive surprises in the USDA figures, said Frontier’s Jon Duffy, although maize stocks were slightly higher than expected. “This all pushed UK markets down because it’s becoming increasingly clear that there’s not a problem with wheat, there’s plenty of wheat in the world and we’re probably looking at another big harvest.”
Prices could also be affected by the general election, with a hung parliament likely to be better news for wheat prices than an outright winner because the uncertainty would put further pressure on sterling. However, traders think that the market has already factored some of this into current prices.
“The USDA figures do not change the bigger picture, which for us remains bearish all round,” said Simon Ingle at Openfield. However, in the short term, UK wheat is competitive. Growers should look out for old crop wheat buyers and be prepared to move quickly as opportunities arise, he said.
The UK wheat carry-over would not be as significant as last year and things could get tight at the end of the cereal year, he suggested. Problems in the Baltic could bring more old crop business to the UK, but as we get into spring and warmer temperatures those opportunities could be gone, he warned. “If interest in old crop interest wanes, new crop will suffer on the back of that.”
There had been some new crop export activity around harvest where new crop values are similar to old crop. The only thing that would help new crop prices was a serious weather issue, said Mr Ingle.