December 2, 2013

EU wheat prices stabilised due to strong export demand

A busy export programme shows that EU wheat export licenses have already reached the halfway mark of the tonnage expected for this season. Meanwhile, Russia is expected to be a keen competitor.

Ex-farm spot feed wheat prices averaged US$264/tonne on November 27, but the wide trading range is maintained, with the lowest prices in southern England at US$258-US$261/tonne. The highest is recorded in Scotland and the Borders at US$278-281/tonne.

Emergence has been good across central and western Europe, and US winter crops were drilled in good conditions for the 2014 crop. However, there are concerns in Argentina, where each new estimate for the crop being harvested brings a lower wheat crop size, following dry weather early in the crop's life. Another cause of concern was the size and particularly the quality of the 2013 Australian wheat crop.

Through the past few weeks, futures prices have traded in a much narrower range compared with the same time last year and this relative stability in prices presented an opportunity for those looking to use options with the lower levels of volatility reducing premiums, said the Home Grown Cereals Authority (HGCA).

The UK exported 25,600 tonnes of barley between July and September, the highest level since 2009, but will shortly be challenged by the competitive Australian and Argentinean new-crop barley. However the relative strength of sterling makes UK wheat less competitive against that of other EU exporters and this is reflected in the high number of contract holders choosing to make physical deliveries against futures contracts for November.

A total of 1,457 tenders were submitted against the London International Financial Futures and Options Exchange (LIFFE) wheat contract for November 2013, compared with 587 for November 2012 and 128 for November 2011.