New crop discount diminishing as focus turns to harvest 2022

Both old (May-22) and new crop (Nov-22) UK feed wheat futures closed at new contract highs again yesterday at £322/t and £293/t respectively. The discount between new and old crop prices now stands at £29/t. Only just over a month ago (7 March) the gap between the two contracts stood at a substantial £54/t.

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So why has the discount shrunk? The impact of the war between Russia and Ukraine has been the key driver of markets of late, with the conflict leading to the ever tightening of global supplies this season. As we edge closer to next season, the focus has started to switch to harvest 2022. As we covered in Market Report on Monday, the USDA have cut the Ukrainian grain harvest by 20% on the year due to a reduction in area planted. On top of this, dryness in the US and parts of Europe may have an impact on global wheat output for next season.

Domestically, the wheat area is expected to be higher in 2022. At the end of March, 81% of the crop that was is in the ground was in good/excellent condition according to the AHDB Arable Crop Report. However, it is worth noting that we are still a fair way off harvest so any adverse weather, as well as a substantial increase in input costs, may well have an impact on total output.

As we progress through the year, the focus on next season’s crop will continue to ramp up. As such, we may well see the gap between old and new crop tighten further if concerns around global supply greaten. Weather conditions in key exporting nations will have a bigger bearing on volatility, on top of new information, with markets awaiting the Canadian planted area data (released 26 April). With UK markets following global price movements, these changes will be felt domestically.

Today's Grain Market Daily on the AHDB website - New crop discount diminishing as focus turns to harvest 2022

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