Wheat Price and the Global Market

Pressure on global wheat markets has knocked values in the past couple of weeks.

The smaller, better quality 2016 crop, combined with weaker sterling, has been keeping UK wheat prices higher than in many other main producing and exporting countries in the past few months.

However, growers should not count on UK market conditions continuing to buck the global trend, traders and analysts warned.

Acreage fall predictions

US growers have seen their lowest wheat prices for 10 years on a heavy supply, leading to predictions that the acreage will fall again in 2017.

AHDB describes UK supplies as “sitting on a knife edge”, but pointed to a recent record high Australian wheat production estimate.

Canada is expected to produce its second-largest wheat crop on record at 31.7m tonnes, despite early snow and harvest concerns.

Overall quality of the predominantly high protein spring wheat crop is yet to be established.
Midweek ex-farm prices for December feed wheat were down about £2/t on average, at £131/t and ranging from £125/t in north-east Scotland to £139/t in Yorkshire.

Barley gap

The gap with barley narrowed slightly this week, with barley putting on about £1/t to average £117.70/t ex-farm and in a range from £109/t in the South East to £121/t in the North West.

Defra’s first estimates of UK cereal supply and demand for 2016-17 show a tighter wheat supply than last season.

Exports have got off to a flying start and animal feed use is expected to rise, mainly on higher poultry feed demand.

Other uses are also expected to increase wheat intake, with human and industrial consumption forecast to rise 7% on last season, if the UK’s two large bioethanol plants remain open.

The estimates leave almost 3.5m tonnes for export and stocks, a 39% drop compared with 2015-16.

Operating stock

Operating stock requirements are estimated at 1.6m tonnes, leaving 1.851m tonnes for export or so-called “free” stock.

Official figures show wheat exports were more than 700,000t between July and September.
This would leave a surplus of 1.139m tonnes for the rest of the season, said AHDB Cereals & Oilseeds’ report on the Defra figures.

Traders estimate that a further 300,000t will have been exported between October and Christmas.
This would leave a potential further 800,000t for export.

Gleadell Agriculture managing director David Sheppard said that given the availability of wheat globally and the UK’s less competitive position, that could be a real challenge.

“New crop wheat is worth £10/t less than old crop, so there is no incentive to carry it over, so carry-out stocks should be low at the end of this season,” he said.