Wheat prices made their biggest jump yet this week as futures markets made gains of up to £30/t.
Farmers can secure ex-farm prices of £185/t for November movement and lock into more than £125/t for the following two years.
News continues to emerge of shrinking worldwide supplies and US and European futures markets continue to edge each other higher still. November wheat futures had reached £193/t on Wednesday, 5 September, with spot feed wheat trading at £180-£185/t in some parts of the UK.
Millers in Liverpool, Avonmouth and London have paid more than £200/t delivered for harvest movement of full-spec group one milling wheats.
Grainfarmers’ David Doyle said the market was moving in “new territory”. “November futures prices have moved up £27/t on the week. It’s self-fuelling – Chicago, MATIF and Liffe markets are pushing each other up.”
Independent trader Robert Kerr said the bull run seen in recent weeks had been fed by a combination of supply problems around the world. “Every month – and lately, every week – there has been some new piece of news.”
A reduction of up to 20% in the size of the Canadian harvest had been followed by growing fears for Australian crops, he said. There had also been speculation that Russia may prevent exports and India had begun to buy much larger tonnages of wheat than expected.
“These prices are all-time market highs. No-one in the grain trade has seen anything like this before.”
There was little doubt among traders that wheat plantings would be higher this Autumn, although exact plantings wouldn’t be measured for some months yet. “I‘ve been to see a farmer today who is ploughing up grass to grow wheat.”
However, disappointing yields this harvest have left some farmers facing the prospect of having to buy wheat to meet their contracted tonnages. Some could face bills worth thousands of pounds.
Mark Cheyney who farms near Alresford, Hants, sold 578t of Optic malting barley forward at £100/t. “It seemed a very good deal at the time,” he said. But the crop yielded just 310t, while prices had risen to £160/t. “It’s a double whammy – we’ve got a dreadful crop and we’ve got to pay £60/t to make up the contract. But we just have to take it and move on.”
Independent arbitrator Peter Brown said there was little farmers could do to escape the default charge. “Merchants sell with one hand and buy with the other – it is a fallacy that they are making money out of this.” There were options such as selling discounted grain forward for next season, to delay the outlay, so it was important for farmers to discuss the options with their merchant, he said.