Bullish markets drive wheat futures prices higher

Global wheat prices have shot up to new record highs, driven by a mix of political uncertainty and supply pressures.

India banning wheat exports from the region was the latest major market driver, alongside the conflict in Ukraine and reduced global supply estimates.

UK spot ex-farm wheat prices collected by Farmers Weekly on Wednesday 18 May dropped slightly by £1.78/t on the previous week, to total £326/t.

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Meanwhile, May 2022 UK wheat futures contracts closed at a new peak of £361/t on Monday 16 May, an increase of £25.70 on the previous week.

UK wheat futures for November 2022 contracts also increased significantly to a high of £360/t on 17 May, before closing at £351.5/t.

Vikki Campbell, arable market specialist manager at the AHDB, said: “With the global supply situation tight for both old- and new-crop, and the UK a net importer of wheat this season, UK feed wheat prices are linking very closely to global price movements.

“Any global volatility, both up and down, will feed directly through into UK prices.”

Market drivers

India’s government announced a ban on wheat exports on 14 May, in an attempt to reduce soaring domestic prices, following a period of exceptionally hot weather that has been affecting crop quality.

It is not yet known how long the ban will last, but some reports from industry indicate it is expected to last for at least several months.

Exports were previously expected to reach 10m tonnes this season from the region and the market looked to India to fulfil some global demand for the remainder of the season, said the AHDB.

The ban is not a blanket ban, according to analyst CRM Agri, with governments able to import, and Egypt has reportedly already agreed to an order of 0.5m tonnes of Indian wheat.

Tight supply

The US Department of Agriculture’s (USDA) most recent World Agricultural Supply and Demand Estimates report forecast reduced global wheat supplies for the 2022-23 season.

The USDA report also projected global wheat stocks at 267m tonnes for the end of the 2022-23 season, down from 280m tonnes during the previous year.

Jonathan Lane, ADM Agriculture’s head of grain trading, said: “While some of USDA’s numbers may be overly optimistic, the report has confirmed the expected tightness of supply into the 2022-23 marketing season.

“With several major crop-producing regions experiencing unfavourable weather or soil conditions, let alone the issues in the Black Sea region, further crop losses are likely. This should support values through the short and medium term.”

The USDA’s Crop Progress report, released on 16 May, also offered more support to global futures markets, with the US winter wheat crop quality downgraded slightly on the previous week.