London wheat futures have reached new highs, following another bullish report by the US Department of Agriculture.
The report cut 1.7m tonnes off global maize production and lowered ending stocks by 4.5m tonnes, well below trade estimates and close to a record low. “The even tighter global inventories, coupled with the indication that demand is not expected to fall significantly at these price levels, are supportive and an indication that large crops are needed in 2011 to alleviate the tight supply situation,” says a report by analyst Rabobank.
Maize prices would have to continue to rise to encourage farmers to increase plantings at the expense of soya beans, which had also reached their highest values in two-and-a-half years. “In our view, higher prices are likely for most agri-commodity markets over the coming months, given the bullish risks which remain in the market.”
After the report, London wheat futures reached a new high on Monday (14 February) of £210.50/t for March 2011 and £187/t for March 2012, before dropping back to close at £207/t and £181.50/t on Tuesday. “Current uncertainty suggests further price gains are likely in coming months with EU prices likely to set record highs prior to new crop harvest,” Rabobank says.