Grain prices break records as millers struggle for supplies

New records have been set in the futures markets as the rise in wheat prices accelerated over the past week and milling premiums exceeded £ 50 / t in some areas.

Past harvests saw the biggest increases, with London’s May 2022 feed wheat contract at £ 245 / t delivered on Wednesday 24 November. This is an increase of £ 17 / t over the week.

By midweek, off-farm values ​​for the December feed wheat movement ranged from £ 221 / t to £ 242 / t, up from £ 208 / t to £ 232 / t the previous week. Full spec milling wheat has traded in a range of £ 268 / t to £ 280 / t, up on average just over £ 16 / t over the week.

Premiums for milling wheat have jumped again as millers struggle to source supplies on several fronts, having started the current crop year with little stock.

First of all, transportation is always at a premium. Second, their normal sources of imports to the UK are more expensive. Third, in addition to the damage to crops from Canada’s summer thermal dome, recent flooding in that country has interrupted transportation networks in some areas, so grain cannot be transported to ports.

See also: Advice on reducing fertilizer rates when prices are high

At the Openfield Farmers’ Co-op, grain marketing manager Glenn Mason said every day brings a different challenge.

“We are in a very volatile market – apart from the fundamentals, investors use commodities as a hedge against inflation. There are no bearish drivers.

Mr Mason said the millers used as much locally grown grain as they could, with decent premiums for materials that didn’t meet full specifications.

“The biggest problem is that the imported alternatives are more expensive than the domestic equivalent,” he said. “There is nothing cheaper available, so they have to be a bit more flexible than normal and are very skillful. “

Main factors for strengthening cereal markets

  • Strong global demand for wheat; tight and declining stocks in exporting countries
  • EU exports wheat at a rapid pace – around 30% ahead of official data from last year, which is underestimated as some declarations are missing for French shipments
  • Canadian culture damaged and reduced by thermal dome; now floods are preventing travel to ports
  • Possible hike in Russian export taxes and a new quota in 2022
  • Massive Chinese purchases in the first 10 months of 2021 – wheat imports of 8.1 million tonnes (6.7 million tonnes in the same period last year), barley of 9.9 million tonnes tonnes (6 million tonnes in 2020) and corn 26.3 million tonnes (7.8 million tonnes last year)

Russia’s export policy reinforces firm tone

The threat of an increase in Russian taxes on wheat exports in the new year and a new export quota has contributed to the overall strength of the market.

The dramatic rise in prices over the past three months has meant that producers who can afford it have refrained from selling, which has further tightened the market.

While a large harvest of Australian wheat is expected, concerns are expressed in particular about its quality and protein content.

Demand remains relatively strong for US ethanol, which uses just over a third of the US corn crop.

Biggest wheat harvest in 2022

AHDB’s early survey of plantings and planting intentions for 2022 puts the wheat area at 1.81 million hectares, which is above the 10-year average.

Barley, forecast at 1.1 million hectares, is down slightly from 2021 area, with a return to winter barley, AHDB Cereals and Oilseeds said.

He warned that the expected drop in spring barley area may not be as large as initially thought, as high grain prices and lower spring crop fertilizer requirements could result in more large area seeded than initially expected.

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