What’s driving exchange rates? Grain market daily

• UK feed wheat futures (Nov-24) closed yesterday at £184.75/t, down £0.55/t from Friday’s close. The May-25 contract fell £2.15/t over the same period, ending the session at £196.75/t.
• Competitive Black Sea supplies continue to weigh on European wheat markets. Russian wheat prices declined further last week, with analysts expecting new crop supplies to add further pressure. Demand sentiment was also affected by Egypt’s failure to secure the large volume of wheat it had sought in last week’s tender (LSEG).
• Paris rapeseed futures (Nov-24) ended yesterday at €453.25/t, down €0.25/t from Friday’s close. The May-25 contract closed at €455.75/t, also down €0.25/t over the session.
• European rapeseed prices were relatively unchanged yesterday, despite gains in US soyabean market. Chicago soyabeans were supported on the back of short covering and dry weather concerns across key soyabean regions in the US.

Sign up to receive the Weekly Market Report and Grain Market Daily from AHDB.

I last wrote about exchange rates in June, when Macron’s snap election caused the Euro value to slide.

Since then, much has happened. The Euro dropped further, bottoming out at 1.1907 against sterling on 24^th July and remained around that level until 31^st July. In that week, UK feed wheat futures (Nov-24) fell £4.25/t, ending at £191.75/t, and moved in line with wider global market movement.

In the following week, the Euro strengthened, closing at 1.1607 on 6^th August. Domestic feed wheat futures (Nov-24) gained £0.35/t. Over the same period, Paris milling wheat futures (Dec-24) fell €3.00/t.

So, despite domestic prices rising slightly, the European prices fell, as UK exports became more competitive. This emphasises the importance of exchange rate movements in UK export markets. If sterling is relatively weak, it will help UK exporters and vice versa.

Key factors driving the Euro’s comparative strength were first, the reduction in interest rates in the UK, the first reduction since March 2020, announced on 1^st August. Lowering interest rates makes sterling less attractive to investors and demand drops, reducing its value compared to other currencies. In addition, in the same week Germany released better than anticipated industrial output figures, strengthening the Euro.

The medium-term outlook appears to show the effect of the interest rate reduction reducing. Further currency movements will be influenced by a range of factors including the state of the EU economy, political stability both in the EU and the UK and the timing of future interest rate cuts here in the UK. AHDB will be closely monitoring these influences and assessing the impact on UK exporters.

Sign up to receive the latest information from AHDB.

While AHDB seeks to ensure that the information contained on this webpage is accurate at the time of publication, no warranty is given in respect of the information and data provided. You are responsible for how you use the information. To the maximum extent permitted by law, AHDB accepts no liability for loss, damage or injury howsoever caused or suffered (including that caused by negligence) directly or indirectly in relation to the information or data provided in this publication.

All intellectual property rights in the information and data on this webpage belong to or are licensed by AHDB. You are authorised to use such information for your internal business purposes only and you must not provide this information to any other third parties, including further publication of the information, or for commercial gain in any way whatsoever without the prior written permission of AHDB for each third party disclosure, publication or commercial arrangement. For more information, please see our Terms of Use and Privacy Notice or contact the Director of Corporate Affairs at info@ahdb.org.uk  © Agriculture and Horticulture Development Board. All rights reserved.