Uncertainty around Russian and US wheat prospects for harvest 2021 has driven UK and global wheat prices higher as speculative investors turn their attention to agricultural commodities and China makes big purchases.
May 21 LIFFE wheat futures broke above £190/tonne last week, bolstered by global markets and a weak pound. Nov 21 LIFFE wheat futures have also been boosted.
Peter Collier, CRM AgriCommodities, said UK grain markets continued to be pushed up by global uncertainty about the prospects for wheat in Russia and the US while the Argentinian crop ‘continues to suffer’.
He added: “Speculative investors have piled into agriculture on the basis of these dry weather headline-grabbing new stories, viewing them as an attractive investment opportunity.
“Similarly, in France, strong buying of wheat from China has buoyed Paris milling wheat futures and in turn UK feed wheat values for both current and new crop contracts.”
Currency was also an area to watch due to the uncertainty of Brexit negotiations, with the pound trading well beneath the levels recorded when a deal seemed likely.
“A return to the £1=€1.15 or even £1=€1.2 level relative to the euro is certainly now one of the larger downside risks to domestic prices,” Mr Collier said.
“Additionally, with speculative investors taking a greater involvement in agricultural products, there is a building risk that this current bullish market sentiment could be quickly reversed.”
Dry conditions in the US have driven prices higher.
AHDB senior analyst Helen Plant said: “In the winter wheat growing states, the dryness is now the most widespread and intense for mid-October since 2012.”
This comes at the same time as concerns about winter wheat crops in the Black Sea region for the 2021-22 season.
She added: “Usually at this time of year, prices take more lead from current season factors, with new crop conditions getting more important as we move towards spring.
“However, currently these early concerns about 2021/22 supplies from some of the top exporters are supporting both old and new crop wheat prices.”