Russia-Ukraine tensions rattle grain market nerves
© Tim Scrivener Grain prices are rising as tensions between Russia and Ukraine risk disrupting exports from the Black Sea region.
Both Russia and Ukraine are key global wheat exporters and the potential risk to supply is making for a nervous global wheat market.
The London May 2022 feed wheat futures contract had risen to £229/t on Wednesday 23 February, up £9/t on the week.
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Ex-farm feed wheat for March averaged £225/t on the same day and ex-farm feed barley averaged £208/t, both up on the previous week.
Grain trading adviser CRM Agri suggested crude oil would be a strong indicator of market confidence or fear, and warned markets driven by politics could change direction very quickly.
Jonathan Lane, head of grain trading at ADM, said continued uncertainty over the Russia-Ukraine crisis remained the key influence on global grain markets.
At AHDB, senior analyst Helen Plant said further escalation of the tensions could affect grain exports, natural gas and crude oil prices.
“Higher crude oil prices can make it more attractive to use biofuels, such as those made from wheat or maize. More demand for biofuels increases demand for the grains and vegetable oils they are made from.”
Regional variation
Rising oil prices and high transport costs are causing greater regional variations in wheat prices around the UK.
Midweek, ex-farm feed wheat prices ranged from £214/t for March in the South East to £249/t in Northumberland.
In the East Midlands, some storage facilities are reportedly very full, which is pushing prices down.
Prices in Kent and East Sussex are lower than the national average due to the high cost of moving grains to feed mills in other regions of the UK, as grain exports from south-eastern and southern counties are relatively low.
Zoe Andrew, grain trader at Frontier, said: “It is normal to see these price differentials around the country, but they have been exacerbated this year because of the haulage situation.
“The demand from feed mills has been really robust and that remains the case, particularly in the North. Haulage from the South and the East, however, has been challenging.
“In some years, you might be actively shipping grain from Tilbury and Southampton, which would bolster the local prices in those areas, but that export market hasn’t been particularly active in the UK this season, because there isn’t a huge exportable surplus.”
Feed barley prices midweek ranged from £199/t for March in Essex and Hertfordshire to £220/t in Shropshire and Cheshire.
Stocks
The International Grains Council (IGC) forecast global opening stocks of all grains at 596m tonnes for 2021-22, down 5m tonnes on 2020-21 levels. About half of this is in wheat stocks.
Both global consumption and production of grains are predicted to reach record highs, according to the IGC.
Mark Smith, trading director at Saxon Agriculture, said there had been a slight tightening of overall stocks this season.
“On wheat, stocks are still fairly comfortable – we have seen a progressive tightening, but there is enough old-crop wheat left in the system,” Mr Smith said.
“Overall global stocks are tighter – we have seen five consecutive years of total grain stocks reducing, which is primarily driven by ongoing strong demand. The world consumes a lot more grain every year.”