Wheat prices have given up some of the gains they made during the first weeks of the coronavirus crisis, amid forecasts of a global supply glut.
The UK farmgate feed wheat price fell to an average of £147/t, down £5/t on the week, leaving it at its lowest level since 11 March, but still well above its seasonal low of less than £130/t in early autumn last year.
There were also falls on the futures market, with the May-20 price about £152/t in interday trading (15 April), down from £157.80/t a week earlier and a peak of £166/t on 23 March.
With the November-20 price at close to £164/t, this leaves the spread between new- and old-crop at £12/t – its widest point this season.
There is little hope for UK wheat prices to rise much further than current levels, with the rising value of sterling making imports cheaper, and panic buying receding as traders get to grips with the coronavirus pandemic, said CRM Agricommodities director James Bolesworth.
This week, the United States Department of Agriculture (USDA) latest global wheat production forecast for 2019-20 put supply levels at an all-time high of 764m tonnes, up from 731m tonnes the previous year, with about half of those stocks in China.
Significant price increases are therefore only likely if these figures are revised downwards, with traders closely monitoring a lack of rain in southern Russia and parts of Europe.
The widening gap between old- and new-crop prices has increased the incentive for farmers and grain traders to hold on to stocks until after harvest, and with a small 2020 harvest of 10-10.5m tonnes, there will be more storage room available than usual, he said.
The small harvest size also means grain buyers are willing to pay a higher premium than normal for homegrown wheat, to shield themselves against the volatility of buying from the global marketplace.
This is why the UK new-crop feed wheat futures price is already trading at a premium to French milling wheat futures, even after currency is accounted for.
UK growers are set to harvest a very small rapeseed crop this season, after many hectares failed completely and others that made it through winter are infested with flea beetle larvae.
The only upside to this dispiriting picture is that it will help to underpin values to an extent, despite a crash in the price of crude oil and a collapse in demand following the shutdown of large parts of the economy due to social distancing restrictions, said Mr Bolesworth.
Availability of old-crop is tight and, providing the economy begins to get back to work after harvest, there is likely to be strong demand for limited supplies of new-crop too, meaning prices should follow any recovery in crude oil prices.
However, a reduction in biodiesel production has sent the price of rapeseed meal soaring, hitting dairy farmers and other users, with the average delivered price this week rising £4/t to £285/t.
This has been mirrored by the rise in value of distillers’ dried grains, as ethanol production from maize fell in the US.
The UK delivered price for imported maize distillers’ grains stood at £255/t this week, back from £262/t last week, but still well up from £218/t four weeks earlier.
AHDB analysts said the recovery in the value of the pound had held rapeseed prices back from rising as much as they had on the continent.
Delivered oilseed prices to Erith for May delivery have gained just £1.50 since 27 March, despite the value of Brent crude rising from $22/barrel to $29/barrel in the same time period.