Grain markets firm as buying interest grows

Ex-farm wheat prices have risen by about £3/t on the week, putting feed wheat at £106-115/t. November feed wheat futures were rising as Farmers Weekly went to press on Wednesday (22 October), with November 2014 reaching £119.10/t, a £2.60/t rise on the day.

In the South the improvement has been mainly through export activity, while interest from ethanol plants in the North has helped.

However, markets were very unlikely to see a significant rally, warned traders and the HGCA.

EU export licensing has progressed well, with 8.4m tonnes committed for the season so far.

This was higher than at the same time last year and may mean a reforecast of exports by the EU Commission, said HGCA’s new Grain Market Daily report.

Kent merchant Grain Harvesters is exporting through Rye this week, sending 10.5% protein and 150 Hagberg soft wheat to Belgium, earning growers a £2-3/t premium over feed, said the firm’s Tim Porter.

“Buyers have been looking to take a bit of cover, but we haven’t turned the corner,” he said.

Other factors in the improving market include:

  • A slightly weaker pound, helping UK competitiveness
  • Recent speculator activity in grain markets, mainly in the USA
  • Strong buying interest from Egypt
  • Uncertainty over how much quality wheat is available in France
  • Slower-than-average US maize harvest progress.

The HGCA’s analysis of UK supply and demand predicts a slight rise in demand for barley for human and industrial uses this season and a 7% increase in demand for wheat for human and industrial consumption.

The wheat increase is mainly the result of expected growth in wheat use by bioethanol plants, although the HGCA cautions that ethanol margins are sensitive and oil prices continue to fall.

About 3.3m tonnes of UK wheat will be available to export or carry over into the 2015 harvest year, providing a big marketing challenge.

At 2.2m tonnes, the barley exportable surplus is about 20% higher than last season, but a good start has been made, with barley exports to the end of August up 85% on the same time last year.

Good forage availability and low livestock output prices are keeping a lid on feed demand, but the weather could soon change this.

As Farmers Weekly went to press on Wednesday (22 October), feed barley prices ranged from £100/t ex-farm in north-east Scotland 
to £107/t ex-farm in the east Midlands, Cambridgeshire and Bedfordshire.

Oilseed rape values have remained steady this week, curbed by falling crude oil prices (for ex-farm prices, see our online Prices and Trends page).

See also: Global crop quality and the strength of sterling spell bad news for producers

Futures markets and commodity risk management online course:

  • Risk management strategies for a more predictable financial performance
  • Educated conversations when collaborating with your advisors
  • Negotiate better prices with your grain merchants

View course