Wheat prices have stabilised a little since the middle of March when the full scale of coronavirus hit countries across the world, but the general trend remains upwards amid global stockpiling and mounting European weather fears.
At the beginning of Tuesday April 14, London May 2020 futures feed wheat prices stood at £158/tonne, which was £3/tonne more than in early April, £20/tonne more than the position’s low point in October but £8/tonne lower than in the third week of March.
Russia has given priority to its home market and is holding back exports, while Brazil has indicated that it is looking to buy more wheat and flour to ensure that its people’s needs are met.
The EU is capitalising on global demand, with figures showing that 24.8 million tonnes of wheat have already been shipped from the union this season, two thirds more than last year.
The US wheat crop appears to be in good shape, but there are now concerns over the European crop, including British wheat which, after a very wet winter, is now being hit be a dry spring.
“The French Agriculture Ministry has put the French soft wheat area at 4.6 million hectares, 7.5 per cent down on last year and the smallest for 17 years,” said Simon Ingle of merchants Frontier.
“This, coupled with the reduced UK winter wheat area, means the two countries are likely to produce 11 million tonnes less in 2020 than in 2019.”
Grain prices may be held back a little by a global slump in demand for fuel.
The Government had set a biofuel inclusion target of 9.75 per cent this year but fuel demand has fallen by more than 25 per cent since the lockdown, which will knock-on to reduced crop for fuel demand.
An oversupply of oil had pushed oilseed rape prices down more than 15 per cent since January, but values rose following news of a global cut in crude oil production agreed by the world’s largest producers, most notably Russia and Saudi Arabia.
Increases in grain prices will be welcomed by arable growers but could cause more pain to livestock producers.
Pig producers may be more insulated than others as prices for their products remain relatively strong.
Farmers with grain-fed beef are vulnerable as finished prices drift, while those at most risk will be dairy producers who have been hit by tumbling milk prices.