UK wheat futures rebound to £170/t after hitting floor

Global and domestic grain markets have recovered slightly from last month’s lows, with a small uplift this week as a result of heightened tensions in the Black Sea region and talk of potential EU tariffs on Russian imports.

Independent grain merchant Dewing Grain said renewed tensions over the Odesa port facilities in Ukraine are a reminder that geopolitical risks are still present in the grain market.

UK feed wheat futures have risen by 6% in the past two weeks, closing at almost £170/t on 19 March for the May 2024 contract.

See also: UK oilseeds prices driven up by global soya bean markets

Meanwhile, the premium for new-crop has grown further to £20/t with the November 2024 futures contract at £190/t.

James Bolesworth, managing director at CRM AgriCommodities, said: “Grain markets have found their feet after, in many cases, touching three-year lows late last month and falling below the cost of production for many growers.”

Mr Bolesworth added that the upside risk to wheat prices looks markedly more significant than the downside over the next six months.

He said: “Volatility could be marked too, if funds are tempted into reversing their negative stance on grains, an outcome which only looks more likely given the outlook for lower interest rates.”

EU considers tariffs on Russian grains

Cereals markets have been buoyed by talk of potential tariffs on grain from Russia and Belarus by the EU Commission.

The Financial Times reported this duty could be as much as €95/t (£81/t).

Andrey Sizov, head of market analysis firm SovEcon, said this measure could increase the cost of imported grain from these two countries by approximately 50%, potentially eliminating demand for it. However, he added that supplies from Russia are negligible.

Meanwhile, the UK has had a 35% tariff on imported Russian grains since 1 June 2022.

Global production

There has been some downwards pressure on markets due to increased production, with the International Grains Council (IGC) projecting global grain production to rise to 2.332bn tonnes for 2024-25.

This is 1.2% higher than its forecast of 2.304bn tonnes for 2023-24, and almost 3% higher than its estimate for total production in 2022-23.

Global wheat production was forecast at almost 800m tonnes for 2024-25, up by about 10m tonnes on the year.

However, UK wheat production is likely to be much tighter for 2024-25, potentially down from 14m tonnes to below 10m tonnes, according to the AHDB.

This has also been the case on the Continent, with Strategie Grains forecasting its EU-27 wheat crop to be 4% lower on the year at 121.6m tonnes.