Milling wheat premiums remain strong: Grain market daily

• Yesterday, US markets were closed due to the national 4 July holiday. With strong demand for European wheat on the global market in the absence of US markets yesterday, Paris milling wheat futures gained support. As a result, UK markets were boosted too.
• UK feed wheat futures (Nov-22) settled at £267.00/t yesterday, up £1.00/t from Fridays close. Paris milling wheat futures (Dec-22) recorded a larger gain of €7.50/t, to close at €335.75/t on Monday.
• Nov-22 Paris rapeseed futures closed at €667.00/t yesterday, down €6.00/t from Fridays close.

Over recent weeks, we have seen UK wheat prices coming down from the record highs recorded when the war began in Ukraine. Without underplaying the severity of the situation in Ukraine, for global grain markets, this has now been ‘factored in’ and is acting as a floor for price movements. With harvest now underway in parts of the Northern Hemisphere, global grain markets have felt the pressure, with prices coming down. While strong global demand for European grain has cushioned the fall, domestic markets have followed the downward trajectory.

While prices are coming down, they remain well above levels recorded this time last year. What is interesting is that despite the downward turn in markets, the premium of milling wheat over feed wheat has remained high. As at 30 June, milling wheat for November delivery into the North West was at a £66.95/t premium to Nov-22 UK feed wheat futures. For comparison, this time last year the premium of delivered milling wheat into the North West (Nov-21 delivery) was £32.70/t over the Nov-21 futures contract (as at 1 July 2021).

While we can’t say for sure what the size of the 2022 wheat harvest will actually be, it is expected that it will be larger this year than last, driven by a larger planted area. So, you may be thinking, why the bigger milling wheat premiums? It is a given that the current level of volatility and uncertainty on the global market has its part to play. However, looking closer to home and it would appear that domestically the market may have its reservations over the quality and quantity of the 2022 milling wheat pool too. With high fertiliser prices there were questions earlier on in the year whether or not farmers would use their last application of fertiliser or not. On top of that, wet weather when the crop was flowering in some regions may have had an impact on quality.

A lot can happen over the next few weeks as we approach harvest and harvest begins. Any adverse weather at harvest may impact the quality of the crop. However, until it is actually cut, the full picture on quality and even quantity of domestic milling wheat this season cannot be assessed fully. One thing is for sure, the current premium of milling wheat is looking rather attractive for a grower.

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