Wheat values continued to strengthen this week amid continued concerns over the South American drought, rumours of export restrictions and ongoing tight supplies.
During the week to Wednesday, March futures had gained £6/t, pushing ex-farm wheat values to £155-157/t.
Although rain had fallen in Argentina recently, it was not enough to replenish the yield potential of ailing maize and soyabean crops, said David Eudall, senior analyst for grain and oilseeds at AHDB.
“Yield expectations have plateaued and as time goes by, the likelihood of improvement diminishes. For maize, the damage is probably already done. All this will push demand onto the US market, which needs to protect its low stocks.”
Rumours of Argentinean export restrictions have increased, while a similar move by Russia is also seen as increasingly likely following its recent strong export programme and weather worries over this season’s crop.
Problems with Black Sea logistics have added to demand for UK feed wheat, said Mr Eudall. A shortage of railcars had restricted access to ports. “Growers in the Ukraine are also reluctant to sell grain until they have a better idea of what the new crop looks like.”
This has helped maintain the fast pace of UK exports, which hit a two-year monthly high in November of 443,000t to top an estimated 1.4m tonnes by the end of December. “It is looking like another big export year and we could see relatively tight supply towards the end of the season,” said Mr Eudall.
New crop values have also risen slightly, up £1.50/t in the week to Wednesday to £149.75/t. “They have not followed old crop as quickly, suggesting that the market thinks the South American focus is short term,” said Mr Eudall.
The latest report from the International Grains Council increased current season maize production by 8m tonnes, but ending stocks were pegged at 125m tonnes, 6m tonnes lower than 2010/11.
World wheat plantings for harvest 2012 were forecast to rise 2% to 225m ha and production by 6% to 690m tonnes. Ending stocks were also raised by 9m tonnes to 204m tonnes, just 2m tonnes below the record.
Simon Christensen, domestic grain director at Frontier, said there was currently enough uncertainty over crop development in Ukraine, Russia and South America to underpin both old and new crop values.
“The whole grain complex looks relatively well supported, but UK old crop exports need to continue as they have. With political elements to contend with as well, it certainly won’t be a one-way ticket from now until harvest.”
While the UK market had a tight feel, it was regional. “The North has not seen the export activity and there has been no Ensus effect this season, so there is plenty of grain there.
“As far as new crop is concerned, we cannot lose sight of the fact there are significant crops of wheat in the ground. Depending on how crops develop, there is the potential for prices to move lower again as we progress towards harvest.”