World trade pressure keeps wheat prices low
Wheat prices show little sign of improving amid good harvest reports, tough export trade and depressed global commodities.
London wheat futures for November 2015 remain stubbornly low, but climbed slightly in the week to £114.59/t as Farmers Weekly went to press on Wednesday (26 August).
See also: 5 key influences on grain price explained
Spot ex-farm feed wheat prices ranged from £100-£112/t, compared with an average of £102.20/t a week ago.
Concern about China’s economy has pushed world grain prices lower over the past few weeks – as have bumper crops in the Black Sea region and higher-than-expected crop estimates from the US Department of Agriculture (USDA).
Commodity markets across the world dropped sharply on Monday (24 August) when the Chinese stock exchange plunged 8.5%.
Global grain trade
- Chinese financial crash hits commodities
- UK feed wheat exports face competition from Black Sea and Baltic states, despite low spot and futures prices
- Traders struggling to sell large carryover stocks
- UK harvest yields positive, with grain quality good, but too early to tell after rain
Gleadell trading director Jonathan Lane said anecdotal accounts showed good UK wheat yields so far. This, combined with a 3.6m tonne carryover crop, could take the UK’s exportable surplus to between 2.5m tonnes and 4m tonnes in 2015-16, depending on domestic use and eventual end stocks, he said.
“Thankfully for UK farmers, the wheat that has been cut seems to have performed well, which may go some way to making [up] the [price] gap,” Mr Lane said.
“If we continue to have good yields, currency aside, I wouldn’t be surprised if we see prices slide further.”
He said finding buyers had been “very challenging” and there had been fierce competition from Danish, Baltic and Black Sea sellers, which meant demand from Far Eastern markets had dried up.
Openfield head of sales and trading David Doyle said low prices had failed to bring more demand and the strength of the pound meant the UK was “not making an impression” in export volumes.
British harvest progress shows a mixed picture following a week of rain. Traders said protein levels and bushel weights had been good so far, though it was too early to know whether quality would be affected by the weather.
All eyes are now on the Chinese economy and harvest progress in the USA, where the Pro Farmer Crop Tour suggests the USDA estimates may have been overstated.