Posted on February, 5, 2024 at 06:44 am
UK feed wheat futures continued to drop this week. Yesterday the May-24 contract closed at £174.80/t down £1.15/t on Wednesday’s close and another new low for the contract. New crop futures (Nov-24) closed at £192.10/t and now approaching the contract’s lowest price (£189.40/t).
Global grain prices have been under significant pressure recently from weak demand and falling export prices in Russia. For example, Russian spot feed wheat for export (FOB, Novorossiysk) was quoted at $202.50 /t (£159.80 /t) yesterday (UkrAgroConsult, ECB).
This bearish sentiment could continue as the Russian Agriculture Minister projects that the total 2024 grain area will increase by 300 Kha, to 84.5 Mha. An estimated 20 Mha of the area is winter crops and as of December 96% of crops were in a good or satisfactory condition.
European prices need to track Russian prices to stay competitive on the export market, and UK prices follow European price trends. So, any further falls in Russian prices will likely feed into domestic ex-farm wheat values.
It’s not only Russian crops faring well, winter wheat in the US is also experiencing significantly better conditions than last year. In a weekly drought update 17% of US winter wheat were growing in drought conditions, as of 30 January 2024 (USDA). This is down from 22% from the previous week and a significant improvement on this time last year (58%).
With competitive Black Sea supplies dominating wheat markets currently, the absence of any large international tender is pressuring grain markets. As prices decline, it gives large global consumers little incentive to buy more than their minimum requirements.
For wheat markets to be significantly supported we are going to need a major weather event. Currently, the rapid progression in the plantings of Brazil’s second maize crop is not offering any support.
Source: AHDB