The UK Grain Market: Where is the price floor?
There is no way to sugar coat the current state of the UK grain market. We have seen it take a sharp nose dive from this year’s feed wheat peak of £240.00/t back in February. As I write this, feed wheat prices have fallen back to £191.00/t, with potential to drop further as we enter a seemingly bottomless price pit. The story for barley and oilseed rape is much the same.
This price cut was difficult to anticipate. A lot of customers were waiting to see the results of the grain corridor renewal, hoping to sell on a price spike which never materialised. The sixty day extension of the trade deal has been made very apparent as the continued flow of low costing grain from Russia and Ukraine continues to flood the global market pressuring prices significantly.
Despite this price decay we are seeing a high number of listings in each of our trading periods from across the country. The reasons behind this are the usual culprits of liquidity and storage requirements, as well as farmers foreseeing prices worsening as we head towards harvest. This is ‘against the grain’ of the ordinary trends we see of prices rising as we approach harvest. We should, however, have learnt from the past year that today’s market is extraordinary and must be treated so. The volatility we are seeing emphasises the need to be proactive rather than reactive in order to anticipate and seize opportunities as they arise.
As I said in my previous blog, it is very much a game of musical chairs with old crop - the music is slowing and the chairs are filling up. Old crop listings for spot movement are seeing fewer and lower bids as merchants are struggling to find a home for current grain, driven by lower than usual demand. In Herefordshire this week we have seen a £7.00/t price difference between feed wheat moving in June rather than May, clearly depicting the current market conditions.
Customers are now facing the decision of whether to carry grain over into next harvest. We continue to see old crop trade at a significant discount to new crop, with LIFFE futures showing a £17.00/t difference comparing May ‘23 to May ‘24. In physical terms, feed wheat in Herefordshire traded at £209.00/t ex farm for October ‘23. This week also sparked selling interest for crop ‘24, which traded at £192.00/t ex farm in Cheshire for Sept ‘24.
Georgia Turner / Business Development Executive
Georgia.Turner@graindex.com