UK feed wheat futures drop to new contract low

May 2023 UK feed wheat futures dropped to a low of £244/t shortly after markets opened on 2 December, down by £46/t on month-earlier levels.

This is an all-time low for the May 2023 contract, which peaked at £356.8/t on 16 May.

Stronger sterling and weaker demand for exports, with tough competition from supplies leaving the Black Sea region, are putting pressure on both global and domestic wheat markets.

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Ex-farm feed wheat spot prices collected by Farmers Weekly averaged £234/t on 2 December, down £7.30/t on week-earlier levels.

Prices ranged from £223/t in Oxfordshire, Buckinghamshire and Northamptonshire to £246/t in Northumberland.

Zoe Andrew, grain trader at Frontier, said it seems extremely likely that markets would see a fourth week of losses and lower closes.

“There has been quite a few international tenders this week, and Russian and Ukrainian wheat have been the significantly cheapest supply.

“So, US exports are losing demand to those places and that’s pressuring US futures a little bit, which acts as the barometer market.”

Ms Andrew said the pound is also a bit stronger against the dollar, which puts additional pressure on UK markets.

The pound stood equal to 1.32 US dollars on 2 December – sterling has continued to strengthen since exchange rates troughed at $1.07 on 26 September.

Domestic markets

Feed wheat is at export parity in the UK, following a high-yielding 2022 harvest that leaves a large exportable surplus available.

This means UK prices will need to remain competitive on global markets.

Issues in the poultry sector across the UK and Europe are also reducing some demand for grains.

Feed barley prices averaged £217.70/t ex-farm on 2 December, with a regional spread of £213/t in Cambridgeshire and Bedfordshire, to £225/t in Norfolk and Suffolk.

Wider market drivers

Weather in the US, Argentina and Russia could all offer support to markets.

Ms Andrew said US winter wheat is rated at 34% good to excellent currently, which is worse than any other winter wheat crop heading into the winter since ratings began in 1986.

Dry weather caused by the weather phenomenon known as La Nina is affecting crop conditions in Argentina.

Feed and grain trader ADM Agriculture said in its weekly market report that the breadbasket regions of southern Buenos Aires and La Pampa in Argentina would see the wheat harvest shrink after droughts and frosts this year, with output estimated at 3.7m tonnes, down 31% on the year.

With a cold front expected, adverse weather conditions in Russia and Ukraine could have an effect on crop progression in the region.