May 24, 2010

The grain market in Ireland has moved into a period of uncertainty again, with prices to either rise or fall, as largely driven by currency fluctuations.

The pound and the dollar have seen significant movement against the euro in the past week which leaves buyers and shippers a vague future in the market. From their perspective, there is a fear that prices could rise further but the market fundamentals say it should fall again.

Irish prices have held or risen in the past week with wheat now at EUR 133 (US$164.98) to the trade. Most futures market activity saw prices rise in the past week. Chicago reacted to the USDA announcement which sees corn and wheat stocks to increase further after this harvest.

While there are a range of potential concerns about 2010 harvest output, for the moment the market will be driven by world acreage multiplied by normal yields. Potential problems from drought, cold, locusts and grasshoppers remain as only potential supply problems until much closer to harvest. Meanwhile the US harvest is no more than two weeks away and recent crop inspections indicate another high yielding crop.

Imported wheat is currently quoted at EUR 145 (US$179.68) per tonne. Dry harvest prices are both up on the basis or higher futures and stronger sterling but these are both in a state of flux at the moment.

The futures price for November has further to fall than the physical price. While buyers are opting out for the moment, they will have to buy at some point. Recent price improvements have been driven by an unwillingness to take grain out of the Ukraine because of delays in processing VAT receipts and Russia has had logistical problems getting grain to the ports to load the ships.