POLITICS rather than the weather has caused reactions from the market place led by currency changes – and it’s not the best news for farmers in the UK.

The Prime Minister has put the Brexit-starting Article 50 bill before Parliament and has given just five days to debate it. That caused sterling to appreciate against the euro by 2%. Sterling also rallied to a six-week high against the dollar on hopes of an early UK/US trade deal.

Currently, £1 equates to €1.17 and $1.25US and emerging US policy direction has already started to make markets nervous. That and the the firmer pound saw cheaper import offers of wheat into the UK and while still £5 over UK delivered prices, the gap continues to narrow.

Helped by a weak exchange rate and after two 16m-tonne plus wheat harvests, this had put UK wheat in the position where it was competing with the likes of Russia on the international market. But UK wheat has gone, in just six months, from being some of the most competitively priced in the world to amongst the most expensive.

This year’s tighter UK wheat balance, in contrast to the well supplied world picture, combined with a UK strong export campaign at the start of the season, has meant UK wheat prices have steadily risen up the world charts.

The May, 2017, Liffee feed wheat futures were down £1.05 on the week to £149.05 and for November, 2017, new crop wheat was down £2.15 to £136, while November, 2018, was down £1.20 to £140.15 and on Monday of this week, futures dropped by another £1.05.

UK ex-farm price for bread milling wheat was up £1.60 to £149.80, feed wheat was down 10p to £145.40 and feed barley was up 70p to £122.

Frost damage to winter crops across the EU and Ukraine has been low so far, despite earlier concerns of snow melt making winter crops vulnerable to extreme low temperatures of around -22°C being forecast over the next few days and one to watch to see what happens there.

Demand from UK feed compounders, as well as other demand sectors, has kept delivered prices relatively unchanged this week, with orders placed for the months of February and March. Feed barley continues to trade at a big discount to feed wheat domestically, with little export demand.

Global animal feed production set a new record in 2016 at 1.03bn tonnes compared to 990m tonnes in 2015 and in Europe production increased by 3.3%.

Old crop malting barley is not moving at present with little fresh maltster demand and new crop malting barley prices fell this past week in anticipation of a large EU malting crop.

In the US, concerns over various free trade agreements has weakened US maize futures but, so far, UK wheat markets have not been affected by the weaker maize futures but will be one to watch.

The UK imported a cargo of Polish maize last week for the bioethanol industry and shows that consumers are looking for cheaper alternatives to wheat, so we could see some downward pressure on wheat prices across the EU from maize.

UK rapeseed prices delivered to Erith have fallen by £3.50 on the week to £368.50 and earlier in the week fell by a further £7 per tonne partly due to further strengthening of sterling against the euro and US dollar. While Paris’ May, 2017, rapeseed futures fell only by €1.75, this equalled a drop of £7.50 per tonne in sterling terms. Not helping prices either, the UK rapeseed supply and demand situation is becoming more balanced, with reports of incoming imports not far away.

In 2016, the UK’s poor rapeseed yields were due mainly to physical challenges such as cabbage stem flea beetle and UK yields were recorded at 3.1 t/ha – or the lowest since 2013-14 and the lowest total production since 2004-05.

The EU production has faced similar issues, however early forecasts for EU 2017-18 production say it could reach 22m tonnes, or a recovery to levels last seen in 2015-16. Total UK rapeseed production is not expected to match that rise and our production is calculated to be around 1.89m tonnes, meaning another tight year for the crop in the UK.

UK delivered prices to Erith have remained at a premium to EU prices due to us being in a rapeseed deficit, being below the 2m tonne level. Since 2007-08, the UK has been a nett exporter of rapeseed in years when the crop has been 2m tonnes or larger, so this year the UK prices are likely to remain at a premium to other rapeseed prices in 2017-18.

Price relationships are usually pretty stable with England – where most crushing capacity is – but with a UK deficit, looking at it from a Scottish perspective and with no significant domestic usage, Scottish rapeseed needs to find a home somewhere. This could be Erith, Hamburg, Rotterdam or Antwerp, but this year UK-based crushers will be needing to draw in supplies from further afield.

It falls that the nearest available surplus region would be Scotland, so the market will be pricing itself to attract Scottish supplies to England – another reason for Erith prices moving above Hamburg.

The top three global rapeseed exporters are Canada, Australia and Ukraine, with Canada shipping 70%, Australia 20% and Ukraine 10%.

There is an alternative to rapeseed and we could see a greater level of substitution, which is likely to occur at consumer level rather than at the crushers, when they could choose an alternative oil to replace rapeseed.