Support for domestic grains: Grain market daily

Market commentary

• UK feed wheat futures (Nov-22) closed yesterday at a near four month high of £293.20/t, gaining £10.95/t from Friday’s close. Nov-23 closed at £279.00/t, gaining £7.40/t over the same period.
• The domestic market followed the gains in both Paris and Chicago wheat markets – continue reading below for more information on this.
• Paris rapeseed futures (Nov-22) closed yesterday at €642.50/t, gaining €13.00/t from Friday’s close.
• This afternoon, AHDB Cereals & Oilseeds are hosting one of a number of webinars, which are an introduction and demonstration of the proposed Digital Grain Passport. To sign up for today’s event starting at 15:00, please click here.

Support for domestic grains

Grain and oilseed markets were boosted yesterday as Russia struck Ukrainian cities, in apparent revenge, after Putin declared an explosion on the bridge to Crimea to be a terrorist attack.

This warfare re-ignited the fears that grain shipments out of the Black Sea region could be hindered. As of yesterday, 304 voyages have carried c.7Mt of grain and other foodstuffs from Ukrainian ports since the grain corridor agreement was signed at the end of July, further insight and information can be found here.

Yesterday, UK feed wheat futures (Nov-22) gained £10.95/t over the day to close at £293.20/t. This is the largest daily gain for this contract since 8 July. New-crop futures (Nov-23) also gained £7.40/t.

Grain markets yesterday were pricing in risk premiums, as if Black Sea shipments could be impacted, which is causing large volatility to domestic grain prices.

Interestingly, the discount from new-crop (Nov-23) to this current marketing year (Nov-22) is closing. As displayed on the right-axis of the graph above, this discount grew as large as -£65.40/t in the middle of May. However, as of yesterday, this discount was at -£14.20/t, pricing in the fact that this escalation of conflict could go beyond this current marketing year (2022/23).

Currently the UN-brokered grain deal, which allows exports from the Black Sea, is to expire at the end of November 2022. There have been efforts from the UN to extend the deal for a year to remove the uncertainty, but this is yet to be agreed.

The war in Ukraine continues to underpin grain markets. While we don’t have a crystal ball to show the outcome of this war, we know that prices are going to remain volatile for as long as it continues.

If the Ukraine export deal is extended past November 2022, we could see supply concerns ease once again and markets come back down. This will remain a watch point going forward.  

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