European wheat prices continue to firm, gaining from doubts over the potential extent of Russian wheat exports from both the 2014 and 2015 crops.
London’s May 2015 feed wheat futures price gained more than £3/t by mid-afternoon today (1 December) to stand at £139/t, while November 2015 rose by £2.35/t to £144.50/t. This follows a rise of more than £3/t on the May contract last week.
Analyst SovEcon has revised its opinion downwards on the size of the 2014 Russian grain crop, which it now thinks could fall to 86m tonnes against earlier higher estimates. This compares with an official estimate of 110.3m tonnes.
In addition, SovEcon said Russia’s winter-planted crops were in the worst state on record, with a high risk of winter kill in some regions.
Both Russia and Ukraine face huge challenges because of the extent to which their currencies have lost value and there is grain trade talk of possible measures to protect their domestic markets. This could include export restrictions and plant health measures.
Russian growers are holding on to grain as an insurance because local wheat prices are rising as the rouble falls. In turn, the currency fall is pushing up growing costs for the 2015 crop, for which there is still a large spring area to drill, and growers in Ukraine face similar problems.
The pace of EU grain export licences has risen, with more than 500,000t issued last week, bringing the total this season to 12m tonnes, which is higher than at this stage last year. UK wheat exports to the end of September were lower than our wheat imports to the same date, but the pace of exports is reported to have picked up since then.
The Bidwells/Openfield grain report this morning commented that while lower oil prices would help some areas of the economy, it could affect UK grain prices negatively because oil prices influence what bioethanol processors can pay for grain supplies.
Despite the recent steady firming of grain prices, traders are quick to warn that things could turn the other way as quickly, if not more quickly. Thursday’s latest International Grains Council report showed wheat, soya bean and maize stocks all predicted to grow by the end of the season compared with last year.