Grain prices steady after prolonged fall

Grain prices steadied in the week to Wednesday (23 August) after falling for six weeks.

A continually weakening pound, lower stock carried in to the new season and a stop-start harvest have helped to cushion UK prices from wider factors.

These include the likelihood of producing the world’s largest ever wheat crop, including a much larger EU wheat harvest than last year.

Each successive estimate of the size of the Russian wheat crop is larger than the one that went before, with the latest at 80m tonnes compared with the 72.5m tonnes produced last year.

See also: Legal, tax and management tips for a smooth harvest

As a result Russia, Ukraine and other neighbours are aggressive export bidders, mopping up Egyptian business against few tenders of EU origin.

However, logistics may be a limiting factor in Russian export progress.

The drop in prices has encouraged importing countries including Algeria, Tunisia and Iran to come back into the market, say traders.

London’s November 2017 feed wheat futures contract reflects the decline on physical markets – on 11 July it reached £154/t but by lunchtime on Wednesday (23 August) it stood at £137.50/t.

Narrowing range

The regional range of ex farm feed wheat values narrowed as the harvest moves north and supply improves, removing some of the new crop premium further north.

Spot prices midweek were slightly up on a week earlier and ranged from £126-127/t ex farm in the eastern Counties and south-east of England, to £135/t ex-farm in north-east Scotland, with the average gaining slightly on the week to £129.54/t.

Unless harvest pressure really builds, prices are expected to hold steady in the short term, say merchants.

Europe has seen widely variable weather, with rain delaying harvest in Germany, Poland and the Baltic, giving rise to serious quality concerns.

The German wheat crop looks slightly smaller than in 2016 but quality is suffering. The UK has relied on a good supply of German milling wheat for the past two seasons, so milling premiums will be worth watching closely as harvest progresses.

Full spec breadmaking wheat was worth £138/t-145/t midweek, with an average premium of £13/t over feed values.

Heatwaves and low rainfall continued to affect much of the Mediterranean, Central and Eastern Europe through July and into early August, said AHDB Cereals and Oilseeds.

However, EU maize output looks close to 60m tonnes (compared with 61.1m tonnes 2016) – a larger EU maize crop could weigh on feed grain prices, warned AHDB.

Tighter carry-in stocks, weaker sterling and early season export demand appear to be supporting feed barley prices in England and Wales, said AHDB.

Barley values have fallen less than those for wheat, with feed barley in a range from £114-118/t midweek and averaging just over £116/t, a slight improvement on a week earlier.

Grain price influences

  • Largest ever world wheat crop expected
  • Quality under pressure could mean larger feed wheat pile, potentially higher milling premiums  
  • Tighter UK supply this season – lower carry-in stock and average/slightly above average yield on a 2.5% lower acreage
  • Sterling has been falling since early May and midweek was worth €1.08, helping UK export competitiveness
  • Russia and other Black Sea origins very aggressive on export markets