Domestic wheat prices backed off last week. Friday-Friday old crop (May-21) futures were down £5.25/t to close at £202.50/t. New crop (Nov-21) however only lost £1.70/t over the same time period, closing on Friday at £165.50/t. At 11am this morning, May-21 was up £0.50/t and Nov-21 was up £0.75/t from Friday’s close.
Delivered feed wheat in East Anglia for May 21 movement lost £5.00/t on the week, now quoted at £209.00/t. The loses for East Anglian milling wheat for the same movement period were greater, losing £8.00/t, with prices currently at £228.50/t delivered.
On Thursday, the pound traded at £1 = €1.14 against the euro, these are levels not seen since last May. Support has come from the Bank of England saying there was no chance there would be another cut to interest rates in the short term. As well a good vaccination progress giving hope of a strong economic recovery. A stronger pound puts downwards pressure on domestic prices because it means our exports become more expensive and imports are cheaper.
For the UK, prices dropped to the £200/t support level in the middle of last week, and then hovered around that level. Sterling has continued to gain against the euro and is back up to levels seen last April. This has capped support for grain prices.
New crop values have seen more support than old crop. Shifts in the tax relief available on wheat usage in renewable fuels and the potential for introduction of E10 fuel are supporting the new crop sentiment.
Old crop delivered feed wheat values lost further ground last week in line with futures prices. We can see a further squeeze on premiums for some regions. Lacking demand for milling wheat persists, and premiums fell again on Thursday. The premium for new crop delivered feed wheat (Nov-21) into North Humberside, extended by £1.00/t to £6.50/t over Nov-21 futures week-on-week.
May-21 UK feed wheat futures rose by a similar amount to US markets last week (Fri-Fri). This was despite sterling rising. On Friday, sterling hits its highest level against the euro since end-Feb 2020 (£1 = €1.1562) and since April 2018 against the US dollar (£1 =$1.4014).
Delivered prices for feed wheat and feed barley rose by similar amounts to UK futures (Thu-Thu). But there were smaller price rises for Group 1 bread wheat. The market is working through stocks built ahead of the EU exit deadline. In addition, demand is curtailed for some market sectors by the coronavirus restrictions.
AHDB will release the next estimates of UK grain supply and demand on Wednesday.
UK feed wheat futures May-21 closed at £207.00/t on Friday, up £1.50/t on the week. New crop (Nov-21) gained £0.75/t Friday to Friday. Prices rose on Thursday fuelled by the news of E10 fuel launching in September 2021 but backed off slightly on Friday.
Delivered bread and feed wheat prices gained alike last week (Thurs-Thurs). For new crop feed wheat (Nov-21), North Humberside prices gained £3.50/t on the week to £179.00/t. Similarly, East Anglia delivery (Nov-21) gained £3.50/t week-on-week to £172.00/t.
Why have we moved to a surplus from a deficit? The forecast for domestic consumption for 2020/21 fell by 814Kt from November’s estimate to 12.62Mt. This is mostly on account of a fall in animal feed consumption. This fall more than offset production being cut to the lowest in nearly 40 years at 9.66Mt.
But the surplus is before exports are accounted for. The UK exported 116.7Kt of wheat from July to December, shifting the surplus to a deficit of 43.7Kt. Therefore, the wheat balance remains tight into next season, especially with the potential of added E10 demand.
The incessant and extreme wet conditions are now presenting huge challenges for every farm’s spring agronomy and cropping decisions.
Plans are being urgently reevaluated and rejigged to set priorities for treatment, with a watchful eye on deadlines for timely spring crop establishment when a window allows. And all against a backdrop of potential damage to soil structure to fields from traveling in waterlogged conditions.
Lessons learned from last year have proved invaluable, with the latest Syngenta Spring Guide giving an insight into some of the tips and ideas to help with this season’s decisions...