Wheat prices under pressure as continental combines roll

Wheat prices have fallen by about £5/t in the past week, as harvest makes better progress than expected in other European countries.

Better weather in the US has raised hopes for crops there and added to the downwards pressure, with US futures losing US$10/t (£8/t) last week.

The November London feed wheat futures contract stood at £144.50/t midweek – down £5.50/t on the week and just over £18/t lower than where it was a year ago.

Spot feed wheat prices lost just over £5/t in the week to Wednesday (10 July), to average £140.70/t ex-farm, while new-crop for September averaged £138/t, a fall of £3/t compared with a week earlier.

Grain market factors

  • Heavy wheat crops are weighing on prices – hot weather in central Europe has not done as much damage as was feared, according to early reports.
  • AHDB Planting and Variety Survey put the UK wheat area at 1.80m hectares, up 4% on 2018.
  • UK will need to export wheat – sterling at six-month low against euro, but UK supply still uncompetitive
  • Very little new-crop export business on the books, so competition could get even hotter
  • Maize also likely to provide stiff competition for UK wheat in domestic market

See also: Markets analysis: cropping margins for 2020

The regional price range for new-crop has narrowed to about £10/t, from £133 to £143/t ex-farm for September.

Sterling has fallen to a six-month low against the euro, which should support UK grain prices, but has failed to do so.

Against the dollar, the pound was at almost a two-year low as Farmers Weekly went to press on 10 July, with £1 worth $1.25, compared with $1.32 in early May.

Analyst CRM sees a 15m tonne-plus crop as likely for the UK, which will mean we will have an exportable surplus. The market agrees, with the drop in futures reflecting that sentiment.

European futures also fell to almost a two-month low earlier in the week.

French wheat crop

France’s Ministry of Agriculture puts the country’s 2019 wheat crop at 37m tonnes, an 8.5% increase on last year’s crop and about 4% above the five-year average.

About 75% of French crops are rated good or very good and the country was not drastically affected by the recent heatwave, said the AHDB.

German Farmers Association DBV puts the country’s wheat crop at 24.1m tonnes, compared with 19.6m tonnes last year.

The Black Sea area is still offering the world’s most competitive wheat supplies, and Ukraine is set to repeat last year’s record 35m tonne wheat crop.

Corn and soya worries

US maize prices have been under pressure as conditions for the crop improve, although plantings are 9% down on the previous year because of very heavy rains.

However, with the Chinese African swine fever pig slaughter continuing, there are market worries over demand for both corn and soya beans.

AHDB analysts put the wheat outlook as neutral to bearish. “Large global supplies and forecasts of good harvests are driving a marginally bearish feeling to the market at the moment. However, volatility from the maize market will drive daily movements,” it said.

The maize outlook was similar, although with more uncertainty and volatility.

Any UK wheat exports are likely to be centred on southern Europe, with Spanish production feeling the pressure from the European heatwave, said the AHDB.

The hottest competition comes from Ukraine, which is offering export wheat at £14/t cheaper than UK supplies.

Oilseed rape

The Paris oilseed rape futures market rose on Tuesday (9 July), adding £5/t to UK prices, as fears grew that crop yield will turn out even lower than expected.

The French crop is down 27% year on year to 3.64m tonnes – the smallest crop since 2003 – and early oil analysis is low, according to farmer co-op United Oilseeds.

This will raise demand, although global oilseed production will rise.

September prices ranged from £305 to £321/t ex-farm on Wednesday (10 July).