Currency fluctuations offer support to falling grain markets

Grain markets have continued their downward trend over the past week, with nearby London wheat futures losing around £3/t following similar losses last week.

Although Ukraine agreed to limit milling wheat exports to 1.2m tonnes by the end of the season, that was not much lower than last year’s trade, so lent little support to markets, said a report by the HGCA.

However, currency fluctuations could offer some support, with the weak euro and pound against the dollar aiding EU and UK exports. “The downside is that the weaker euro hits UK competitiveness into key European markets, where the lion’s share of UK crop exports traditionally go,” said the report. “On the flip side, UK exports are finding competitiveness on the world market, which is denominated in dollars but unfamiliar territory.”

As UK wheat prices declined they were becoming increasingly competitive against US maize, said HGCA analyst Arthur Marshall. “Trade data shows that non-EU destinations have already accounted for a much larger proportion of UK wheat exports than by this point in 2011-12 – the last season the UK was a net wheat exporter. The continuing currency trends and abundance of EU grain suggest this could increase further.”

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