Wheat prices hit by weather and currency factors

Wheat prices have come under further pressure this week, with futures markets on both sides of the Atlantic hitting new contract lows.

London May wheat futures were trading at just £161.30/t on Wednesday 30 April, as Farmers Weekly went to press, down almost £4/t on last week’s closing value – driven lower by weather developments in the US.

November wheat futures were also down, at just £182.55/t on Wednesday 30 April, though still suggesting a £20/t premium for new crop.

See also: Fertiliser prices climb amid challenging global outlook

According to the AHDB, rain in the key growing states helped stabilise conditions in parts of the US, and further rains this week were benefiting cereal crops.

The USDA has reported that 49% of the US winter wheat crop is now in “good” or “excellent” condition, up from 45% last week.

“With over a quarter of US crops now at ear emergence, weather will have increasing influence on yield potential,” said AHDB senior analyst Helen Plant.

“Further rain is expected this week, and that has been weighing on prices.”

Plantings 

Despite the US rains, there has been strong progress with spring planting, with wheat, maize and soya beans picking up the pace.

The US maize area is now expected to grow by 5% this year, taking it to the highest level for 12 years, putting another “bear factor” in the market.

Crop conditions are also improving in Europe.

The EU Commission’s latest crop report points to higher yield expectations for pretty much all crops compared with a month ago, while in France, 74% of the wheat crop is rated “good” or “excellent” compared with 63% at the same point last year.

Currency factors are also weighing on the UK grain market, with sterling having firmed against the US dollar, amid fears the US could be heading towards a recession.

A strong pound makes exports more expensive and imports more competitive.

With the pound now trading at $1.33, compared with $1.24 at the start of the year, the impact has been to put pressure on domestic prices.

Fundamentals 

Traders suggest domestic fundamentals offer little encouragement, with ex-farm wheat at about £163/t this week.

“There is still ample old crop weighing on the market,” said Andrew Buck of Cefetra.

“Some farmers may be looking to carry this over into next season, but not many have the storage capacity to do that.”

For those that do not, Mr Buck says the best chance is to look for any “weather markets” to sell into.

“It looks set to stay dry for the next two weeks at least, so we could see new crop coming under stress, which might help.

“I hope we are now at the bottom of the market, but I felt that when it was £20/t higher,” he added.

Globally, the grain market still looks oversupplied, however, and any forced release of stocks ahead of harvest could weigh further on prices.