Weather boosts wheat futures

SOME STEADY rain has replaced more harmful thunder rain for many areas this week and will have done a lot of good for crops and grassland growth.

What we need now is a return to sunshine and heat, instead of the cold air from the east that has kept temperatures down in the eastern half of the country and especially the South-east region for what seems like months on end.

Wheat prices have been supported by weather issues around the world and November new crop feed wheat futures were at a five-month closing high of £123.50, which is £3.85 per tonne up on last week.

July, 2016, old crop feed wheat futures were up £4.15 to £107.45. As a result, there is a price carry of £15.15 from old to new crop and farmers with storage and available cash flow may well look to hold on their wheat in store and sell post-harvest.

Countries such as Russia, Australia and elsewhere in Europe look to have large crops for this coming harvest and Russia, for example, is forecast to produce 109m tonnes of cereals, compared to 104.8m tonnes in 2016.

Its wheat crop is projected at 61.1m tonnes and further expansion of its maize area is expected to set a new record of 13.7 million tonnes. Barley production is also expected to grow to 18.3m tonnes but will remain well below record levels.

That all means that Russia is likely to be an aggressive exporter in 2016/17, putting additional pressure on world wheat prices and, specifically, on French prices.

Crops in France have suffered from recent heavy rain and subsequent flooding along with cold conditions and all their crops have been downgraded by 2-5 % in just one week amid fears of fusarium issues.

But there would appear to be no shortage of wheat around the world, though disappointing South American production forecasts have increased the market’s reliance on large 2016 US soyabean and maize crops to ensure a growing global population gets fed.

Japan’s weather agency forecasts the development of La Nina by August, 2016, so this is giving cause for concern.

In the US, there are also concerns over the potential for La Nina and resulting dry weather which could cause stress for the newly planted soyabeans and, therefore, could impact on yield potential. Hot weather in the US for row crops is also one to watch and again is giving cause for concern.

The Brazilian maize crop forecast is now put at 76.2m tonnes compared to 85m tonnes in 2014/15 and their soya crop is expected to be down nearly 2m tonnes to 95.2m tonnes. Over the past two months the uncertainty surrounding Brazilian maize output has added a bullish sentiment to global maize markets.

In sterling terms, Chicago maize futures prices have increased by 17% since last September and currently sit at around £118 per tonne. The upward movement for maize markets has pulled other cereals such as wheat with it.

December Chicago wheat futures have increased by 11% and the gap between feed wheat and maize is narrowing, making wheat a more competitive feed grain. Chicago soya futures have risen 7% on the week to close at just under £290.00.

This is the highest price for the contract since June 2, 2014, and is due to a rise in fund buying activity, South American supply concerns and increasing weather worries in the US.

Exports of maize from the world’s largest producer of grain, the US, have soared over recent months and weekly nett sales of its grain for the current marketing year, which ends in August, reached 1.6m tonnes as at the week ended June 2.

This takes the total tonnage up to 44.1m tonnes, 2% ahead of the same point last year.

Last weekend the USDA released its latest world agricultural supply and demand forecast which brought mixed estimates for global grains.

For wheat, global end of season stocks for 2016/17 are put at a record high of 257.8m tonnes. For maize, global end stocks are forecast to decrease by 1.3m tonnes to 205.1m tonnes and, despite the decrease, if realised, this would be the third highest level on record.

UK wheat exports in April reached the highest level for that month since 2010 at 243,000 tonnes. This takes the season to-to-date exports up to 2.23m tonnes, nearly 30% ahead of the same point last season.

The relative weakness of sterling since the start of 2016 has made UK wheat amongst the most competitively priced in the world, boosting exports over this period.

EU wheat exports are 9% behind the same point last season at 638m tonnes but the current level is still 22% ahead of the five-year average of 523m tonnes.

UK ex-farm prices have firmed slightly this week with bread milling wheat up 70p to £120.10, feed wheat up £1 to £105.70 and feed barley up 30p to £98.70. Oilseed rape delivered Erith is up £3.50 to £287.