November wheat futures eased back to around £150/t delivered on Tuesday after peaking at £158/t last Thursday (August 5) when Russia imposed a six month ban on grain exports.

The ban starts on August 15 and for the time being includes existing contracts, prompting shippers to search for alternative supplies and intensifying speculative activity on French and US futures markets.

This week’s easing is thought to be the result of profit taking and some book tidying in advance of the next US Department of Agriculture market and world trade forecasts on August 12. However, with feed wheat prices in a range from £135-140/t ex-farm off the combine, this is still around £30-£35/t better than most businesses have in their budgets for the 2010 crop.

With harvest still at a relatively early stage, it will be many weeks before clear outcomes on quality and yield can be given although EU wheat yields are above the five year average so far.

“This is one of the most difficult markets to read, there is so much uncertainty,” said Mike Adams, export director of Frontier Agriculture. “Russia was the price setter when the markets went down and its absence is setting the price again.”

Egypt bought 240,000t of French wheat at the weekend but UK wheat remains export competitive and business is being written.

While the 2010 harvest market is extremely difficult to read, Mr Adams suggested that at current interest rates consider buying and storing fertiliser now to lock in a known production cost and selling some 2011 grain. November 2011 futures were trading around £130/t delivered on Tuesday this week.

South American maize is currently cheaper than wheat or maize from the EU and some feed users are expected to switch to maize over the next few weeks if wheat prices remain high. Spain would be the most obvious destination for imported maize, although not all of the material available would meet the EU’s 0.9% GMO inclusion limit.

Farmer activity was manic last week, but had died off this week, said Mark Worrell, head of domestic wheat and feed barley trading at Openfield. It was difficult to see a scenario in the short term where prices can fall very far while the trade sorts itself out and (the market) is more likely to ratchet sharply higher as hungry buyers try to cover their requirements, said the company in its weekly market report.

Feed barley is trading at the same level as wheat and even at a premium in some areas, but this is not expected to be sustained. EU feed compounders have asked the EU Commission to release the 6m tonnes of feed barley in intervention to ease feed ingredient price pressure.

Middle Eastern demand for barley is normally supplied by Black Sea countries but this year Europe looks likely to benefit from that region’s difficulties in barley as well as in the wheat trade.

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