Volatile exchange rates and political uncertainty have brought wheat trade to a halt over the past week.

UK wheat remains competitive on key export markets, but wild swings in currency have made traders reluctant to commit, particularly in forward trade for new crop. “Because of the political climate, both in Europe and in the UK, we’ve seen some aggressive movements in currency,” said Mark Worrell, head of domestic wheat at Openfield. “Nobody has wanted to quote for export trade for fear of getting it wrong, and everyone is waiting for a period of stability.”

By the end of February, the UK had exported about 1.45m tonnes of the 2.2m-tonne surplus, and there was still plenty of demand to fill, he added. “Arguably, the balance sheet is tight enough that certain areas of the country will be running out of wheat. With the cold nights and backward crops there may be some excitements at the end of the season.”

Nick Oakhill at Glencore agreed that old crop prices, currently pegged at about £100/t ex-farm for June, should remain supported by tightening supplies. “If everything stays the same our prices should improve from here, but sterling is going to be critically important to what happens. We’re still seeing plenty of demand on to the continent but with swings from 85p to 87p against the euro it’s very difficult to make forward sales.”

Uncertainty over the state of the growing crops across Europe was keeping new crop prices relatively firm, at about £95/t ex-farm for harvest and £100/t for November – although that was £5/t down on last week due to currency fluctuation, he added. “But with no real weather issues anywhere in the world just now, I think producers should be taking advantage of the current prices.”

Mr Oakhill said demand from the new Ensus bioethanol plant, which will use 1.2m tonnes of wheat, was already boosting prices in the north of the country. But he still expected an exportable surplus of 1.75-2m tonnes in 2010/11, which would not be helped by an 18% increase in Spain’s soft wheat production.

The US Department of Agriculture released its first estimate for the 2010/11 season on Tuesday (11 May), putting world wheat production at 672m tonnes – 1% down on the year but still the third largest crop on record. Large carryout stocks mean total supplies are projected to be 2% higher, year-on-year, leaving a larger end of season surplus despite a 2% increase in consumption.

Coarse grain production is expected to be a record-breaking 1.13bn tonnes, exceeding consumption and boosting ending stocks by 7.2m tonnes. Oilseeds are also likely to reach a new record, at 440m tonnes – up by 2.2m tonnes year-on-year.