Grain prices surge as supply comes under pressure

Grain prices are continuing to increase as supply comes under pressure from poor harvests and lower yields across the globe.

On Thursday 30 September, UK feed wheat futures for November 2021 stood at £199/t – up from £191/t on 17 September.

Meanwhile premiums for milling wheat are soaring.

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The AHDB has reported that milling wheat into Northamptonshire, for October delivery, was quoted at £36.50/t over feed wheat.

Alice Jones, AHDB senior analyst, said this figure is £19.86/t higher than the 2015-16-2019-20 average for the same week and comes on the back of supply concerns.

“Not only is quality wheat tight, but freight availability is also supporting domestic prices,” she said.

“With freight difficult to price and obtain, traders are having to sift through the more variable-quality domestic crop to fulfil requirements.”

While logistics and quality stay difficult, continued support could remain in the domestic milling wheat market, Ms Jones advised.

Poor harvests globally

A range of factors have contributed to the upward trajectory of cereal prices.

Mark Smith, trading director of Saxon Agriculture, said the strength of the cereal markets this year had been driven predominately by bad harvests in some parts of the world.

The Canadian crop was disappointing and, as Canada is a major supplier of wheat, this has significantly affected on supply.

Russia, the world’s biggest wheat producer, also had a smaller crop than anticipated, said Mr Smith, and the Russian government’s interference in the market, by introducing an export tax, had pushed up prices.

It had been a poor-quality year for the French crop, too, a situation repeated across much of mainland Europe.

All these factors have combined to create a strong international market and, within Europe, a strong milling wheat market.

But Mr Smith warned growers not to take the high prices for granted.

“High prices don’t last forever,” he said. “A sensible marketing strategy is to keep feeding grain into the market to capture the current prices.”

Mr Smith said there were also good opportunities to set up contracts for the 2022 crop.

“The higher prices have spilled over into next season,” he said.

Buoyant prices are continuing in the oilseed rape market, too.

‘Unprecedented’ OSR prices

United Oilseeds said prices for October 2021 ranged from £520-£530 ex-farm, but it was a fast-moving market.

Owen Cligg, trading manager at United Oilseeds, said this level of prices was unprecedented.

“We didn’t think we would see prices of €600/t [£517/t] for November Matif futures, and now they are at €643/t [£554/t],” he said.

At these prices, buyers are reluctant to buy, while sellers are holding on to supply in anticipation of higher prices.

“We are in what I would term the ‘twilight zone’, where prices have the potential to go higher, but we can’t get anyone to physically buy the oilseed,” said Mr Cligg.