UK feed wheat futures (May-23) closed at £236.25/t yesterday (23,02.23). The November 2023 contract closed at £236.00/t over the same period. Domestic prices followed the global market down yesterday and the US market was down due to the strength of the US dollar and export competition.
The UK contract reached £245.00/t on the 14 February and since then it has been forced down. The May-23 contract closed down £4.85/t yesterday, (23/02/23) while the Nov-23 contract closed down £1.10/t, meaning old crop is now only at a 25p premium to the new crop.
Anthony Speight, AHDB senior analyst cereals and oilseeds said: “Despite the recent support from escalations due to the war in Ukraine, as well as whether the Black Sea export corridor will continue, wheat prices are still on a downward trend. What happens next to the direction of wheat prices will largely depend on the renewal of this corridor, and up until this point a degree of volatility is anticipated.
Continuing negotiations
“The trade is still continuing to gauge the prospects of the continuation of this corridor, especially with an escalation in the conflict in the east of Ukraine. However, it’s been reported by the Ukrainian Deputy Infrastructure Minister last week, that negotiations are expected to continue in this coming week, anticipating that common sense should prevail, and the corridor will be extended.”
Obviously, as history has shown us this can all change, but if the corridor is extended, the downward pressure on grain prices will likely continue, in the absence of any other bullish factors. Furthermore, there is still a large amount of wheat to be exported from Russia, which will likely continue to weigh on the grains complex.
From a UK perspective, if the corridor is extended, it is likely that both old and new crop prices will be pressured.” added Mr Speight. “If old crop prices come down at a greater rate, we could possibly see old crop futures move to be at a discount to new crop futures. This price relationship could incentivise some to carry stock over. However the UK has a large domestic surplus of grain this season, wheat in particular, and as we approach harvest 2023, stores will need clearing to make way for new crop. Furthermore, old crop grain will need to be shifted to prevent carrying in a large volume of stock into next season.”
