A nervous grain market saw November 2021 London feed wheat futures rise by more than £6/t on Thursday (22 April) to just over £186/t, another new contract high.
Weather concerns on global corn and wheat production prospects have increased speculative buying, pushing all markets up over the week, said Jonathan Lane, ADM Agriculture’s head of grain trading.
This helped old crop feed wheat values on Friday morning into a range between £186/t ex-farm in the South East and £207/t in Yorkshire, averaging close to £199.50/t. This was a £6/t rise on the week.
The November futures contract had, however, settled back to £183.50/t by lunchtime on Friday, with old crop May futures at £204/t.
Feed barley was in a much narrower range, at £159/t to £169/t ex-farm, and averaging £163/t.
“Dry weather is causing nervousness over vast areas of key northern hemisphere wheat-growing regions, as well as Brazil’s corn crop,” said Mr Lane in the firm’s weekly grain report.
“Drought-like conditions in the Southern and Northern Plains of the US and into Canada have analysts already rethinking acreage and yield potential.
“The very cold spell entrenched across the US is providing additional support due to its likely impact upon the winter wheat crop at the key heading stage.
European crop stress risk
“In Europe, as the recent cold period eases, attention has shifted to ongoing dryness after little or no rain fell in France, Germany and the UK over the past few weeks, increasing concerns over crop stress,” said Mr Lane.
Conditions in Ukraine and Russia have been more favourable, although parts of the Black Sea region could do with rain, he said.
Ukraine should once again be a key exporter of new crop, with a forecast rise of 13% in the country’s 2021 grain harvest to 73.6m tonnes, 27.6m tonnes of which is wheat.
Too much rain is the problem in Argentina, putting the country’s 2020-21 corn harvest behind schedule.
May is a key month for spring crop sowing in the US, mostly dependent on adequate moisture supplies, said Mr Lane. “Further extension of current weather conditions could have major consequences on final production levels.”
Note of caution
Merchant Cofco noted in its report that while the past week has seen sustained support for markets with [speculator] fund buying, the pace of US corn exports remains too slow to achieve export forecasts.
There was also the possibility of an upwards revision to the US Department of Agriculture planting intentions report.
“Ultimately, weather is the big market driver at the moment and will continue to be so over the next couple of months,” said Cofco’s report.
“Markets do need feeding, however, and from a technical standpoint, futures are becoming overbought. Fresh news will be required to maintain higher prices.”