Wheat prices drop, but supplies remain tight

Old crop wheat prices have fallen sharply over the past week, but new crop remains supported by dry weather across Europe.

As Farmers Weekly went to press on Wednesday (11 May), July wheat futures were £9/t lower on the week, at £194.75/t, amid feeble buying demand. Conversely, November futures were £2/t higher than last week, at £174/t, equivalent to about £167/t ex-farm, depending on location.

The US Department of Agriculture produced its first estimate of 2011-12 global production on Wednesday, pegging the wheat crop at 670m tonnes – 22m tonnes more than last year’s harvest. However, a big jump in consumption will erode stocks slightly, to 181m tonnes.

Coarse grain production is likely to reach a record 1.1bn tonnes – up 6% on last year. Although consumption is also forecast to be a record, stocks should increase by 7m tonnes to 129m tonnes, says the report. But a record oilseed crop of 459m tonnes will not meet record demand, leading to a slight fall in stocks, to 72m tonnes.

London wheat futures fell by £5/t in reaction to the news, but ongoing dry weather across Europe, combined with the weak pound, helped to buffer larger drops. Adverse weather across the US is likely to keep markets on edge in the coming weeks.