March 11, 2010

Corn crop will have major impact on UK wheat prices

The US corn crop will have a major impact on UK wheat prices this season, according to a leading economist.

Market intelligence analyst, Jack Watts, said in 2010 the state of the US corn crop will be more influential over UK wheat markets than the state of the UK wheat crop.

While stocks-to-use rations for wheat have recovered, the ratio for corn remains tight. The increase in wheat supplies has been due to the phenomenal performance of agriculture over the last three years.

Grain demand has grown at record levels despite the recession.

"Production on the other hand is more volatile," Watts said. "In 2009-10 funds have been short of wheat. We're still going to see volatile currencies. Both of these issues have nothing to do with the physical grain market."

Harvest 2010 may be a long way off, but with 90% of production in the northern hemisphere, most of the planting decisions had already been made.

The EU wheat area was up by 0.7% to 25.9 million hectares.

"The EU sticks out like a sore thumb. That, in my view, is down to the poor profitability in barley. The EU wants to plant anything but barley," Watts said.

With the world crop forecast at 653 million tonnes and demand expected to rise by 1-1.5% , supply and demand were likely to be closely matched.