Bull run on wheat prices shows no sign of slowing

The bull run on wheat prices showed no signs of slowing as futures markets continue to climb.

Today (Wednesday, 29 August), traders were quoting ex-farm values of £157-£160/t for feed wheat for November movement, with premiums of £30/t available for full-spec group one wheats.

Barley continues to trade behind wheats although discounts range from £11-£15/t depending on location. Spot prices for oilseed rape have climbed £10/t to about £211/t.

November wheat futures were trading at nearly £165/t, with November 2008 contracts at £128.50.

Yields reduced

Further reports of reduced yields in many parts of the world have added to fuel to the fire. The International Grains Council revised its estimate of world production, scaling down output by 7m tonnes to 607m tonnes. Canada also made drastic revisions to its harvest.

Coupled with this, India and Egypt have made further ventures into the market, helping to ramp up demand for US wheat.

Last Thursday (23 August) the Euronext.liffe futures exchange registered its biggest daily gain – £8.50 – for thirty years, although failed to close at this high.

Some millers in the north-west are understood to have paid more than £200/t for delivered wheat, raising speculation that the UK may face importing wheat by the end of the season.

Traders’ views

Glencore Grain’s Nick Oakhill said the UK had little exportable surplus to speak of and had priced itself out of the export market. “It’s likely we will see higher levels of high-quality American or Canadian milling wheat imported.” Other imports of feed grains like sorghum were possible, he added.

Richard Jenner of co-operative Centaur said mounting concerns about quality had helped in remaining UK wheats had helped drive prices to “unprecedented” levels.

“The market keeps going but a significant proportion of farmers had already sold 50% of their crop. Now, with yields hit by 10-20% this has meant some have already sold 70% or more.”

Despite futures markets offering prices over £120/t for harvest 2008, many farmers were reluctant to commit, given a discount of £40/t compared to 2007 wheat, he said.

Ex-farm wheat price this harvest

(Farmers Weekly)