Intense cold over Russia and eastern Europe has helped both old and new crop wheat prices maintain recent gains.
Ice has closed some key waterways which link inland Ukraine and Russia to Black Sea ports, preventing grain from reaching export terminals.
Shippers have been forced to look elsewhere for supplies, reports Glencore Grain.
But the freeze has also blocked key barge routes from countries like Hungary, and water levels have also fallen in the Rhine and Danube.
Spot demand to Holland and Belgium is being filled, mainly from France but also the UK, said James Maw, Glencore’s EU market trader.
This, and a shortage of imported wheat caused by the recent Tariff Rate Quota debacle, helped UK ex-farm prices, which have risen about 1.50/t in the past couple of weeks to 66.50-70/t depending on area.
New crop prices are also up by a similar amount, with November feed wheat worth 67-70/t. Again, the big freeze over many parts of eastern Europe is to blame, raising concerns about crop prospects.
Temperatures as low as -30C in Russia and Ukraine, both aggressive wheat exporters over the past few seasons, could cause extensive crop damage, said Mr Maw.
Areas in new EU member states were also said to be suffering.
There were also concerns about drought in France, which could limit irrigation later in the season, and further afield in the USA.
All this, coupled with the latest International Grain Council survey, which forecasts world production will fall by 20m tonnes in 2006 to 595m tonnes, suggested a tighter world market next year, he added.
However, with intervention stores bulging to the extent that 9m tonnes of wheat could be carried over at the end of the season, Brussels remained in full control of the market.
“If prices move significantly above intervention levels, then Brussels will sell out of store and reduce export subsidies,” Mr Maw said.
“What we are seeing is a classic weather market.
If we consider the range old crop has been trading at over the past six months, then we are back at the top of that range.”
The price of milling wheat has remained largely unchanged, so the premium for Group 1 varieties has fallen to as little as 5/t.
Jon Duffy, Frontier’s grain director, said millers were postponing up to half their deliveries, a situation unlikely to change until the run-up to Easter.
While he advised farmers to sell Einstein, as most of the exportable surplus was Group 2 wheat, it was less clear-cut for Group 1 varieties.
“Premiums are certainly at a low level.
Are we at the lowest level? Maybe.”