Wheat prices jump sharply as markets feel the heat

Wheat futures have jumped sharply this week on the back of sustained dry weather in northern Europe and wet harvest conditions in the south and east, particularly in Romania and Bulgaria.

London futures for November movement reached £119.50/t on Tuesday afternoon – a rise of £8.50/t on the week – as the market was coming to terms with the potential impact of the weather.

While world wheat stocks are relatively high compared with likely demand, world feed grain stocks remain very finely balanced.

The influence of dry weather on the market started a week ago but it had really taken hold this week, said Nick Oakhill at Glencore Grain. “It means that producers in the north can get £120/t ex-farm for wheat before Christmas because of demand from the Ensus bioethanol plant.”

Wheat in France and Germany are thought to be worst affected by the long dry spell with UK yields also expected to suffer but to a lesser extent.

Following two plentiful crops and stockbuilding on a world level, the expectation had been for a third year of the same, said Mr Oakhill. “Now that has materially changed. With the past two years of plenty, consumers have had no reason to take cover but they’ve seen the market turn now and I don’t think they can believe it.”

World wheat demand is likely to be around 650m tonnes and while production was forecast at 668m tonnes most recently by the US Department of Agriculture, the trade is now doubtful that it will make 660m tonnes or even 650m tonnes, putting a very fine balance on things.