Grain prices hit new lows this week, as heavy oversupply both domestically and in global markets continues to dictate trading.
March 16 LIFFE wheat futures had fallen to contract lows of £105/tonne by Monday afternoon (February 8), with analysts suggesting UK arable producers were coming to the realisation the depression in markets was likely to continue for some time.
The continued downturn on prices comes despite UK exports receiving a boost in competitiveness due to the sterling’s relative weakness to the dollar and the euro compared to recent months.
Benjamin Bodart, of CRM AgriCommodities, said: “We have oversupply across the main exporting countries at the moment.
“UK prices have been supported by the weakness of sterling against the US dollar and the euro because of rumours around the Brexit, but the fundamentals are just too heavy at the moment. We have not got any sort of concerns.”
Mr Bodart added the 2015-16 campaign would see record end of season wheat stocks. He claimed there could be further falls in price going forward.
Jack Watts, lead analyst at AHDB Cereals and Oilseeds, suggested time was running out and UK farmers were being forced to sell, bringing further supplies to the domestic market.
He said: “Harvest is five months away and farmers [may be] thinking ‘we may need to start moving material out of store to free up space come harvest’.”
Mr Watts pointed to a growing divergence in markets, with November 16 prices about £11/t more than May prices.
He said: “I would say [storage] is worth looking at for anyone with spare capacity. People may be hanging on and thinking the carry will get wider.”
Prices are also being hit by larger economic issues. Egypt recently cancelled a new tender for grain, despite offers from France, Russia and Romania.
No reason was given for the cancellation, but high prices were reportedly among the reasons being rumoured by traders.
Businessmen from Saudi Arabia are expected to invest £7.3 billion ($10.5bn) in Ukrainian agriculture, according to reports.
According to Saudi sources, the agreement came following a move by Saudi Arabia to stop growing wheat and focus more heavily on overseas investment.
The Black Sea region is an important player in global wheat markets and experts suggested the move could have implications for arable supply chains.