Harvest timeline crucial for wheat prices in volatile market

The timing of this year’s harvest is a crucial factor behind the future of feed wheat prices as old- and new-crop values continue to diverge.

The average August new wheat crop price was £158/t on Wednesday (30 June), while the spot average was well up at £191.90/t.

The prices will inevitably converge, but there is still plenty of time for the volatile market to remain interesting, say advisers.

See also: Advice on keeping wheat green to maximise yields

Differing crop sizes

James Webster, AHDB senior analyst, said the disparity in the old- and new-crop prices is driven by both domestic and global factors.

The UK is expecting a much larger wheat crop next season than the last, which reduces the incentive to carry grain over, and this is also true for the global market, he said.

In addition, the availability of old-crop grains is limited, with wheat ending stocks this season expected to be down 45% on the five-year average.

Prices are likely to be at the mercy of harvest timing, both in the UK and on the continent.

“If we are expecting a timely harvest, I would imagine we would see old-crop prices come down to new. If it’s delayed, then any old crop that is out there could get some support,” said Mr Webster.

“Overall, prices trend down to new crop with no fundamental drivers to support new-crop markets up to current levels.”

Gambling premium

Mark Smith, trading director at merchant Saxon Agriculture, said next season’s production is expected to be about 15m tonnes, compared with the 2020 wheat harvest of less than 10m tonnes – the lowest in about 40 years.

This means the UK will likely move from import parity to export parity, he said.

Old-crop supply is now tight, with very little on farm, particularly in Yorkshire and north-west England, where there is still strong residual demand.

“People who need wheat for July can’t wait for the new-crop price, so will have to pay the higher price. Those who can wait, will wait,” said Mr Smith.

“When harvest gets going and we have some new crop in the system, there is no reason for the old-crop price to be at a premium, but that’s some way off yet.”

Due to the cold and wet spring, which delayed plans, advisers believe there won’t be an early harvest this year or a bumper crop.

“The UK uses about 250,000t of wheat every week, so if harvest is delayed by a week, that’s an extra 250,000t of wheat we have to find from somewhere. So it could be a very lively market towards the end of the season,” Mr Smith said.

“Logic would say to sell old-crop wheat now with that premium, but if you have been brave enough to carry it to July, you are a natural gambler anyway and if the weather isn’t kind over the summer months, there could be some real fireworks in the market.”

High demand

Simon Wilcox, Cefetra farm grain origination manager, agreed that the north of England in particular was still showing high demand for wheat, with the crop having to travel from the South.

Even with a 15m-tonne wheat crop, the UK could end up importing due to the ethanol plants taking more and more new-crop wheat over the increasingly expensive corn, tightening supply, he said.

“That is a bullish factor for the UK and I don’t think prices are going to drop off dramatically because the long-term demand is there,” said Mr Wilcox.

“We are continuing to see China coming into the market and buying on the dips, and that will continue to impact as well.”

The quality of the UK wheat crop should be fine, after coming through the worst of the weather earlier in the year, though quality and bushel weights could be affected if sunshine stays away, he said.

At this stage, the hot weather in the US and Canada and the rain across the EU, where the crops are further forward, is more of a concern.