Weak pound softens impact of US imports on UK wheat price

French maize prices have continued their losing streak following large sales of US maize to Spain – but UK feed wheat values remain supported by the weak pound and domestic buying demand.

On Monday (23 October), French exchange Matif reported maize futures had reached a new contract low of €143.75/t (£128.23/t) for November, a drop of 8% since 27 September and 18% since 20 June. 

According to analyst CRM, private American exporters reported flash export sales of 225,000t of maize on Friday, of which 120,000t was to Spain. Spanish maize imports were now 1.3m tonnes up on last year, at 1.8m tonnes, accounting for more than 40% of the total EU imports so far this season.

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“There are also cheap sources of EU maize being imported to the UK, which is limiting any rise in domestic wheat values,” said James Bolesworth, co-founder of CRM.

“But the weak pound, alongside strong demand for domestic feed wheat – especially in southern England – is limiting any downside.”

Liffe wheat futures remained in a fairly narrow trading range, at about £140/t for November 2017, and about £147/t for November 2018.

Aggressive selling from Black Sea countries was weighing heavily on global grain markets, with other origins unlikely to see much rise in price except through currency movements, added Mr Bolesworth.

“The most influential factor on new crop at this stage is whether or not we’ll remain a net importer or exporter next year.” Given the tight stocks and harvest size, it was most likely to be the former, he explained.

Argentinian biodiesel

Policy changes in Argentina and the EU were also likely to come into play, affecting both the maize and rapeseed markets. Not only were Argentinian farmers forecast to increase the area sown to maize by 5%, the nation was also set to export more biodiesel to the EU, undermining the oilseed rape market.

In early September the EU slashed import tariffs on Argentine biodiesel from 22-25% to 4.5-8.1%, and the first shipments were expected shortly, said Mr Bolesworth.

“The question remains to what degree will Argentine biodiesel substitute EU biodiesel? It could remove between 0.5m tonnes and 1.25m tonnes of oilseed rape consumption, and prices are moving as a result.”

Since 26 September, spot Matif rapeseed futures had fallen from €373.25/t (£332.89/t) to €364/t (£324.57/t), before recovering to €368/t (£328.24/t) on Monday.

“Globally, oilseed rape and canola supplies remain tight; it’s the consumption side that is changing – but there are still a lot of questions over how much EU consumption will be affected.”