Harvest forecast heaps pressure on grain markets

Grain markets came under fresh pressure this week as feed wheat piled up at home and new figures were expected to put world wheat, corn and soya bean production higher.

Despite growers around the world holding back on grain sales, prices continued to slide. Uncertainty over Chinese import demand was a factor, alongside fears of higher interest rates in some markets.

The US Department of Agriculture was due to release a report late on Thursday (11 September), which traders expected would show increased grain and bean production and higher end of season stocks.

See also: Higher world grain production forecast

The London November futures feed wheat contract has lost more than £61/t since its contract high in December 2012 and stood at £117/t as Farmers Weekly went to press on Wednesday (10 September).

Midweek, UK ex-farm feed wheat prices ranged from £103/t in Hampshire to £114/t in Northumberland, losing an average of £3.20/t on the previous week despite a slightly stronger pound and in quiet trade.

Milling wheat premiums continue firm as supplies are sought by domestic and export buyers, with cargoes being loaded for North Africa and France.

The pressure on spot feed wheat is such that, unusually, the November 2015 futures price is at a £14.50/t premium to November 2014 and offers a £7/t carry from July 2015 to November 2015.

However HGCA pointed out the risk of a large carryover in turn depressing 2015 prices. Much depended on demand for feed grains – minor growth in demand compared with production could push the market even lower. However, if current low prices stimulated demand above expectations, this could support prices longer term, said analyst Anna Lockwood.

With a record US crop expected, maize was likely to continue to trade at a discount to wheat.

Grain market analyst ODA puts the UK exportable wheat surplus at 2.2-2.6m tonnes, on the basis of a 16.7m tonne crop. With forward prices into spring covering the cost of storing grain, growers following ODA’s advice were mostly hanging on to stocks. About half were protecting their downside risk with put options, said consultant James Bolesworth.

This gave them the chance to sell, for example, January 2015 feed wheat for £119/t delivered, minus the £3.25/t cost of the option, while hanging on to the physical grain.