July wheat plummets at LIFFE
By Tom Allen-Stevens
THE July wheat futures price suffered its biggest drop today (Tuesday, 29 May) in over a month, adding to speculation that old crop prices may have peaked.
The LIFFE closed with a July wheat futures contract price barely above 80/t, a drop of well over a pound on Fridays price (25 May).
A supply squeeze had seen prices rise by 10/t to a July wheat high of 85/t the week before last.
In a complete turnabout, traders have noticed there are now many more sellers coming to the market, while buyers are losing interest.
“The market definitely has a softer feel to it,” says Home-Grown Cereals Authority senior economist Gerald Mason.
“As well as the demand and supply situation, futures speculators are now creaming off their profits, which has added to the downturn.”
Mr Mason says there are couple of market factors that have contributed to the current situation.
“Firstly, prices have now risen to a level at which users will tend to switch to other grains, such as barley or imported maize.
“You also have to look at why the price rises came about in the first place, and its worth noting barley and maize prices have not risen by as much.”
He says that many analysts were puzzled by the rises, considering the supply balance sheet shows that there should have been plenty of grain in store to satisfy demand.
“But farmers have been slow to bring their grain to market, and this has been in the face of higher usage than expected for the first quarter of this year.”
This could be down to foot-and-mouth disease locking up supplies on farm, Mr Mason says.
Farmers have now cottoned on to the high prices and supply shortages have eased, he adds.
“What happens from here on is difficult to tell. It depends largely on when harvest starts – a delay or an interruption can lead to short term price rises.”
And despite the balance sheet showing a surplus, theres no accounting for day-to-day or week-to-week shortages, he says.
“But despite new crop supply shortages in the UK, prices can only rise to levels at which its as cheap to import grain.”
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