Could recent rain offer support for UK bread wheat premiums? Grain Market Daily

Tuesday, 20 August 2019

Market Commentary

  • UK feed wheat futures (Nov-19) closed yesterday at a new contract low of £137.25/t, down £5.75/t week-on-week. Prices have continued to slide this morning.
  • US grain markets also dropped to yesterday’s close, potentially influencing UK futures, along with increasing prospects for a large UK feed wheat crop in 2019/20.
  • Sterling had been strengthening against both the euro and the US dollar last week, but yesterday’s close saw a drop in value of the pound against both currencies.

Alice Bailey

Analyst

Could recent rain offer support for UK bread wheat premiums?

  • 27% of UK wheat harvest was complete before the recent rains but with much of the UK bread wheat crop still standing concerns are raised about quality.
  • With risks of grain shedding and diluted quality there is potential support for firm premiums for bread wheat.
  • German wheat harvest is 90% complete and quality remains good-average pressurising prices which act as a ceiling for UK bread wheat premiums.

According to the latest AHDB harvest report, the UK wheat harvest started in week ending 6 August and by week ending 13 August, 27% was complete. Once harvest began, bread wheat premiums squeezed as reported quality and yields were strong. By week ending 13 August bread wheat yields ranged up to 11.5t/ha, average proteins were around 13% and hagberg falling numbers around 300.

With 36% of GB wheat area accounted for by nabim Group 1 or 2 varieties (Spring Planting and Variety Survey) there is a fair bit of milling wheat yet to be cut. Much of the UK had significant rain recently and quality is coming into question. Concerns have been raised around grain shedding and reduced HFN post-rain. Coupled with already slightly diluted proteins due to bold grains this could offer support for bread wheat premiums.

It is too early to say whether the rain has had any major effects on quality as few samples have been tested but with unsettled weather forecast the potential risk is amplified. Imported German A wheat often makes up some of the shortfall of UK bread wheat. With UK quality under question it is worth looking at Germany’s wheat crop and prices to indicate the ceiling for UK premiums.

Germany’s association of farm cooperatives (DRV) announced last week that 90% of the German wheat harvest is complete and the production forecast is 23.81Mt, 17.5% higher than last year. Despite the extreme summer heatwave quality is reportedly good to average as most crops were ripe when the heat hit. Yesterday’s imported survey quoted German A wheat at £180.50/t for August delivery, which is £31.20/t above the current Ex-farm price of UK bread wheat.  If premiums of German A wheat continue to slide on the back of good supply this could pressure UK premiums.



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