Wheat prices stable despite supply challenges

Wheat and barley prices remain volatile, driven by political developments in the Middle East and profit-taking in futures markets – but fundamental tightness remains.

Ex-farm feed wheat ended the week to 5 August marginally firmer at about £187/t, while milling premiums narrowed from an average of £16.50 to just under £11/t as quality remains high.

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The ongoing drought across Europe has led the EU Commission to downgrade its total grain production forecast to 266m tonnes – down 8% on last year.

“The difference – 23m tonnes – has to come from somewhere,” said Harry Randell, farm trader at Dewing Grain.

“With Black Sea exports severely disrupted and the US running at 1957-low wheat production, the question of where those 23m tonnes come from does not have a comfortable answer.”

Indeed, Russian exports in July were just 1.9m tonnes versus a more typical 4m tonnes. And EU soft wheat exports reached just 700,000 tonnes by 2 August – down 61% year-on-year. Barley exports were down 82%, at 310,000 tonnes.

“These are extraordinary declines that confirm how severely the current season’s supply and logistics disruption is affecting trade flows,” noted Mr Randall.

“The world is not buying less grain – it simply cannot access it because the supply chain has been comprehensively disrupted.

When disruption eases – and eventually it will – the demand that has been pent up will meet a production base that has been significantly reduced.” 

Maize crops also remain under pressure, with the US Department of Agriculture cutting its corn condition rating by two points, to 61% “good to excellent”.

French maize condition is the poorest since records began in 2011, at 34% “good to excellent”. EU maize production is forecast at 51.9m tonnes, down from 59.9m tonnes forecast in June, boosting import requirements by 5m tonnes to 24m tonnes.

UK barley markets have been mostly tracking wheat values, while demand for malting varieties remains subdued, despite the extreme variability in quality, said a spokesman at Frontier.

“The market has begun to call for leniency on malting specifications, but buyers are in no hurry to rush into making any decisions just yet. There is no panic from the maltster on the prospect of a smaller supply, a harsh reminder of the state of the industry.”