UK Feed Wheat: A Large Exportable Surplus
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UK feed Wheat futures (May-23) closed at £236.25/t on 21 February, down £4.85/t from the previous day’s close. The Nov-23 contract closed at £236.00/t, down £1.10/t over the same period. Domestic prices followed the global market down. The US market was down due to strength in the US dollar and export competition, while the Paris market was down due to chart-based selling and export competition.
UK feed Wheat futures (May-23) felt an element of support since the end of January. The contract reached £245.00/t on 14 February, and since then, it has been pressured. The May-23 contract closed down £4.85/t on 21 February, while the Nov-23 contract closed down £1.10/t, meaning the old crop is now only at a 25p premium to the new crop.
Despite the recent support from escalations due to the war in Ukraine and 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 a degree of volatility is anticipated.
The trade is 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 in mid-February that negotiations are expected to continue in the coming weeks, anticipating that common sense should prevail and the corridor will be extended. If the passage is extended, the downward pressure on grain prices will likely continue without 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. However, if old crop prices decrease more, we could see old crop futures move to a discount to new crop futures. This price relationship could incentivize some to carry the stock over. Though the UK has a sizeable domestic surplus of grain this season, Wheat in particular, and as the country 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 a large stock volume into the next season.
May 2023 UK feed Wheat futures dropped to a low of £244/t shortly after markets opened on 2 December 2022, down by £46/t on month-earlier levels. This was an all-time low for the May 2023 contract, which peaked at £356.8/t on 16 May. Prices ranged from £223/t in Oxfordshire, Buckinghamshire, and Northamptonshire to £246/t in Northumberland. Feed barley prices averaged £217.70/t ex-farm on 2 December, with a regional spread of £213/t in Cambridgeshire and Bedfordshire, to £225/t in Norfolk and Suffolk. Stronger sterling and weaker demand for exports, with tough competition from supplies leaving the Black Sea region, are putting pressure on both global and domestic Wheat markets. Ex-farm feed Wheat spot prices collected by Farmers Weekly averaged £234/t on 2 December.
UK Wheat Trade
According to the AgFlow data, Canada led its import market with 0.2 million tons of Wheat in 2022, followed by France (55,050 tons), Ukraine (50,000 tons), and Romania (37,300 tons). Import volume totaled 56,000 tons last month and 0.4 million tons last year.
In terms of feed Wheat, it is at export parity in the UK, following a high-yielding 2022 harvest that leaves a sizeable exportable surplus available. This means UK prices will need to remain competitive in global markets. Issues in the poultry sector across the UK and Europe also reduce some grain demand.
Other sources: AHDB
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