Wheat prices rise as IGC cuts grain estimate
Wheat prices have received another boost after the International Grains Council yesterday (28 October) predicted a further tightening of world grain supplies.
Its October market report predicted total 2010/11 grain production would be 11m tonnes less than last month’s forecast at 1.73bn tonnes, largely due to worsening maize production prospects in the US and China.
The global maize production forecast was cut to 814m tonnes, which, combined with increased feed demand in the EU and US, meant ending stocks were projected to fall to a four-year low of 125m tonnes.
Although the IGC left its world wheat production estimate unchanged at 644m tonnes, the news sparked a rally in futures markets yesterday. London November 2010 feed wheat closed £5/t higher on the day at £170.75/t, and January 2011 wheat rose to almost £174/t, although it had come back slightly this morning (29 October).
Merchant Gleadell said overall interest in new crop wheat had increased this week, with the November 2011 contract on LIFFE the most traded – it closed at £144.75/t on Thursday.
“Consumers are also showing some signs of life on the new crop as the discount to this year continues to narrow. With the pace of UK exports this season, only a moderate increase expected in UK wheat plantings for next season and demand from two biofuel plants, the old/ new crop spread could continue to narrow.”
It put spot ex-farm prices at £156-164/t, depending on region, for November, up about £4/t on last week and well above the sub-£100/t level at this time last year.
With grain markets looking even tighter and the northern hemisphere harvest largely complete, traders and farmers alike will be watching developments elsewhere in the world with added interest. Below is a summary of some of the key developments.
Bullish | Bearish |
Australia: Rains have raised wheat quality concerns in parts of Queensland and New South Wales. Dry weather causing some concern in Western Australia | Generally favourable wheat prospects across the southern hemisphere (apart from parts of Australia) |
Russian grain export ban extended until 1 July 2011 | Argentina: ideal planting conditions could result in a bumper maize crop |
US wheat crop forecast 1.1m tonnes lower than September | Fall in world wheat output in 2010/11 will be buffered by large carry-in stocks from the previous season |
Dry weather across the Midwest threatens winter crop plantings and emergence. The first USDA crop rating report was the lowest in 15 years. Just 47% of winter wheat rated as good/ excellent, down from 62% last year | EU: Strategie Grains has raised its 2010 grain production forecast by 1.1mt. The 2011 area is predicted to rise 1.2m ha to 57.2m ha |
Global grain use set to exceed output for the first time in four years. World end-season stocks set to fall by 54mt to 345mt |
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