UK feed wheat under pressure? Grain market daily

• May-23 UK feed wheat futures closed at £246.00/t yesterday, down £5.00/t from Fridays close. The Nov-23 contract also lost £5.00/t over the same period, to settle at £231.15/t. UK prices followed the direction of global markets, which were pressured by Russian exports.
• Rapeseed prices were supported yesterday by upward movements in palm oil markets. Paris rapeseed futures (May-23) closed at €598.50/t yesterday, up €11.00/t from the previous session.

December marked the 31^st consecutive month that UK nearby feed wheat futures gained on year earlier levels. The monthly average nearby UK feed wheat price for December was £237.55/t, 6% higher than the average for December 2021.

While the monthly average is still above year earlier levels, it has been coming down compared with previous months. In November, UK nearby feed wheat futures averaged £256.95/t, while in October it averaged £274.72/t. As we fast approach the one-year anniversary of the invasion of Ukraine, and the subsequent start of the price rally in markets, how much longer are we going to see prices elevated above year earlier levels?

As has been well documented, the ongoing war in Ukraine has now been ‘factored in’ to markets, acting as somewhat of a price floor, with the grain corridor extended to the spring. While volatility remains, unless there are any major interruptions in the Black Sea region, it is unlikely this will have a huge impact on markets. At the moment the main Black Sea market driver is Russia’s aggressive export campaign. With an abundance of wheat from harvest 2022, a weaker rouble and relatively high global prices, Russian agricultural agency Sovecon expect near record monthly exports from now until the end of the season (Refinitiv). With Russia pricing very competitively on the export market, global wheat markets have been feeling the pressure.

There are a couple of bullish market sentiments at the moment, one being the extreme cold/dry conditions in the US, and the possible impact on its wheat crop for harvest 2023. However, the impact of this is yet to be known. Likewise, the drought in Argentina is somewhat supporting maize markets, the underpinning cereal of the grains complex. However, overall, with a large Brazilian crop due, the total South American maize crop is expected to be large.

What does this mean for UK prices?

Domestically this season, we have a large exportable surplus of wheat, driven by a bigger crop in 2022, as well as bigger carry in stocks. With a larger exportable surplus, it means that domestic wheat will need to price more competitively for export to prevent even larger carry out stocks.

While we do not have a crystal ball to foresee the future, as it stands currently, the pressure from cheap Black Sea grain is having the larger influence on market movements. Looking ahead, if there has been any winter storm damage to the US wheat crop and as we move towards the end of the Ukraine export corridor extension in March, we could see some support to markets. That said, with recessions looming globally, unless there is another major global event, it is unlikely we will see the price rallies this year that we did last year.

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