Arable farmers with 2007 wheat left to sell can secure prices not seen since the early 1990s.

One Wednesday (15 August) futures prices had reached £155/t for May 2007 movement, while contracts worth £120 were available after harvest 2008.

Widening premiums

Futures contracts for November 2009, the furthest position, were trading at £115/t. 

On the spot market, grain traders were quoting £145/t for ex-farm feed wheat for September movement. Milling premiums had continued to widen to over £30/t, with some traders paying up to £170/t for full-spec group one wheats.

Tight supplies

Markets have rallied dramatically as harvest estimates have become more conservative across Europe and the UK, slashing exportable surpluses and raising prospects of tight supplies in the forthcoming marketing season.

France has revised its yield estimate by nearly 2m tonnes while Germany’s crop is expected to be about 10% down on last year.

Significant reduction

The US Department of Agriculture announced last week a significant reduction in the 2007 global wheat production.

The UK harvest is expected to be about 1.5m tonnes down on last year, according to the Home Grown Cereals Authority.

Under 14m tonnes

Gleadell’s David Sheppard said farmers were reporting yields about 1t/ha below last year, suggesting the total UK harvest could be under 14m tonnes. This would cut the UK’s exportable surplus to less than 500,000t, he said.

“And the EU’s exportable surplus of 2-3m tonnes has already been shipped.”

‘Bullish’

Grainfarmers’ David Doyle said prospects were bullish, but the market could be affected as yields in southern hemisphere crops became known later in the season.

This could lead to upward pressure on harvest 2008 prices, currently trading at a significant discount to the 2007 crop, he said.

Balanced view

HGCA economist Michael Archer said wheat values were at their highest since July 1993, but cautioned against expecting prices to continue indefinitely.

“World stocks for the 2007-2008 marketing season could potentially be fairly low, if forecasts become reality. But it’s important to take a balanced view and a big crop in one of the major wheat producing countries could relieve the pressure.”

Soaring wheat prices

Oilseed rape values had breached the £200/t mark on the back of soaring wheat prices, said United Oilseeds trader David Whyte.

EU yields were predicted to be as much as 800,000t down on the year while usage continued to rise, he said.

“We’re now about 90% of the way through harvest in the EU and UK. We don’t see too much of a downside to the market.”