Wheat futures gain £10/t on the week as prices firm

Grain markets are having a bullish week amid ongoing turmoil in the Middle East and Ukraine, alongside continued hot weather affecting crops across much of the northern hemisphere.

London’s November wheat futures closed at £197.50/t on 21 July, up £10/t on the week, while Paris’ December milling wheat futures settled at €237.75 (£202/t) – up €15/t (£12.75) on the week.

“The £200/t level remains tantalizingly close,” said a spokesman at Dewing Grain.

“The EU maize crop worst-case estimate is now 47m tonnes against last year’s 57m tonnes, while the US Department of Agriculture’s 53.8m tonne forecast would represent one of the most significant European maize supply failures in decades.”

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With serious problems exporting wheat out of Ukraine and Russia, this should divert more demand into Europe, said Mike Verdin, senior markets consultant at CRM Commodities.

“But a strong harvest in North Africa and Turkey means they have plenty of time, which is limiting the upside (for now).”

Meanwhile, hot and dry weather is also affecting US crops, with scouts downgrading average yields in North Dakota’s hard red spring wheat crop to 46bu/acre – down from a previous estimate of 58bu/acre, but above the five-year average of 45.8bu/acre.

“Strong yields are needed to offset a drop in US plantings of spring wheat to the lowest point since 1970,” said a report by Reuters.

Domestic situation

Closer to home, the smaller British, French and German milling wheat crops have been countered by higher quality, dragging group one milling wheat premiums down from about £22/t to £10-14/t since UK harvest began.

“As the feed wheat price has gone up the premium has come back,” said Andrew Buck, head of committed grain at Cefetra.

Yields are typically low at 6-7t/ha, but quality is exceptional at 13-15% protein and some up to 18% – which could potentially displace imported Canadian red wheat required by millers, he added.

The smaller UK wheat crop is also likely to move the UK from a net exporter to net importer, putting a solid base in the feed market.

Meanwhile, oilseed rape markets are also vulnerable to export disruptions from Ukraine.

Paris futures reached a three-year high of €563/t (£478.5/t) for November on 21 July before dropping back to close at €556 (£472.6/t) – still more than €17/t (£14.5/t) up on the week.

US soyabeans are also now cheaper than Brazilian, which could trigger Chinese buying, said the Dewing Grain spokesman.

“The anticipated purchases in coming weeks could provide the demand catalyst that sustains the soybean rally beyond weather-driven support.”