Fickle UK wheat prices bear the brunt of volatile global markets
© Soleg/Adobe Stock Wheat prices in the UK have come under renewed pressure, driven by an exportable surplus of grain and recent uncertainties surrounding the renewal of the Black Sea corridor for exports from Ukraine.
An agreement was still to be formalised as Farmers Weekly went to press on Wednesday 15 March, with Russia pushing to halve the renewal terms to 60 days from 120 days, and Ukraine trying to resist this.
See also: Weak domestic grain market drives prospects for UK exports
The uncertainty about the deal extension was leading to some volatility in the global grain market.
If the deal is renewed, Ukraine will continue to ship cheap grain to world markets, according to Frontier, which will leave other countries with higher year-end stocks.
AHDB senior analyst Megan Hesketh said uncertainty over the Black Sea corridor extension added volatility to markets, in the short and long term, due to how this affects global supply.
Other factors weighing on global markets include improved growing conditions in Argentina following a drought, which is likely to support yields, and an excess of cheap Russian wheat being made available for export.
Increased Australian crop estimates for 2022-23 is adding further pressure to markets, with Abares, the Australian department for agriculture, increasing its wheat estimate by 2.6m tonnes to 39.2m tonnes.
UK factors
An abundance of old-crop wheat still readily available in the UK, combined with limited demand, is adding pressure to domestic markets.
UK prices are forecast by industry to remain fairly bearish during the next few months, but any major swings in global markets would be expected to influence the domestic situation and result in price moves.
Weak domestic markets are reportedly being driven by a lack of consumer interest, reduced feed demand for poultry due to avian influenza, and lower feed demand for pigs due to contractions in the pig herd.
The UK remains fairly price competitive with the Continent, and a weaker pound is supporting export trade. Midweek, the sterling-euro exchange rate was £1:€1.14.
Ex-farm feed wheat spot prices collected by Farmers Weekly averaged £209/t on 15 March, while feed barley averaged £185.63/t – a £23/t discount to feed wheat.
On Wednesday 15 March, May 2023 UK feed wheat futures opened at £217/t, down £4.50/t on the week.
Milling wheat premium
The margin between UK milling wheat and feed wheat prices has widened during the past year.
UK milling wheat averaged £261.33/t on 15 March – a £52/t premium to feed wheat. This compares with a £38/t premium for the same week last year.
Tim Porter, grain trader at Cefetra, said the milling premium had been holding up well, driven by the lack of available 13% Group 1 wheats.
The high-yielding results from last year diluted the protein, so there was a decent amount of lower grade milling wheat at about 10.5-11.5% looking for a home.
“Anyone who has 13% milling wheat is being rewarded, because the mills don’t need to buy as much gluten, which is very expensive, and it is competing against German imported wheat,” said Mr Porter.