Wheat stays firm on dry weather and production forecasts

Wheat prices have seen another firm week, ending with a forecast that world total grain production in 2017-18 will be lower than consumption for the first time in five years.

Nevertheless, heavy stocks still hang over most markets, so any upward movement over the next few weeks is likely to be short term and on weather-related news as harvest approaches.

UK spot feed wheat prices rose only slightly over the week to average £143.80/t ex-farm on Friday (12 May), with a regional range from £138-£148/t.

Spot milling wheat (breadmaking spec) averaged £150/t while spot feed barley value averaged £116.8/t.

“The UK market, whilst influenced by international markets, is slowly heading towards another domestically driven balance sheet,” said Gleadell Agriculture managing director David Sheppard.

See also: Decline in land prices slows as supply dries up

“Continued dryness and forecasts that have rain in them, and then do not, is increasing concerns over new crop prospects, with yield aspirations being lowered to a more average level around 8t/ha.

“The UK already faces a tight 2016-17 balance sheet, so the prospects of another circa 14m-tonne crop leaves little scope for exports and the likelihood of another season as a major importer, given current projected domestic demand.”

Futures markets

The world grain production estimates came from the US Department of Agriculture and pushed up futures markets.

It was a relatively large drop in maize production and stocks which contributed most to the estimate of world grain production being lower than consumption. 

While global wheat production in 2017-18, estimated at 737.8m tonnes, is 2% lower year on year, it is still the second highest figure on record.

Wheat stocks at the end of the 2017-18 grain season are also forecast to hit another record.  

“The thing to bear in mind here is that even though 2017-18 output is forecast lower than consumption, record level stocks from 2016-17 are expected to provide a cushion,” said Amadeep Purewal, senior analyst with AHDB market intelligence.

“However, with stock levels generally expected to deplete next season, the market is more open to supply shocks going into 2018-19 which could increase volatility.”

USDA world grain forecasts

  • Total maize output 31.4m tonnes 1.03bn tonnes
  • Global maize demand projected to rise 2.2% to 1.06bn tonnes
  • End-season maize stocks forecast at 195.3m tonnes – 12.8% lower on the year and lowest since 2013-14
  • Maize stocks-to-use (STU) ratio forecast at 18.5%
  • Global 2017-18 wheat production forecast 2% down on the year at 737.8m tonnes, second highest on record
  • Total wheat consumption expected to fall slightly, to give 2017-18 end of season stock 1.2% higher at a record 258.3m tonnes
  • STU ratio for wheat put at 35.1% in 2017-18, up from 34.7% this season
  • AHDB points out if the wheat 2017-18 STU ratio is calculated excluding China, for which the stats may be less robust, then it is expected to fall to 21%, the lowest since 2007-08
  • Global soya bean output expected to fall in 2017-18 to 344.7m tonnes (348m tonnes in 2016-17)
  • Soya bean consumption forecast at 344.2m tonnes, 12.9m tonnes up on the year
  • Closing stocks of soya bean in 2017-18 put at 88.8m tonnes, 1.3m tonnes down on record level of 2016-17
  • Soya bean STU ratio forecast at 25.8%, one of the highest in recent years

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