WINTER sown crops are coming into spring in reasonably good condition and are now starting to move, despite recent wet weather which delayed fertiliser applications.
This was especially so on the heavier land, where spring sowing has been delayed as well. Even in the south of England spring sowing is not that far advanced and recent wet weather is responsible for that.
The recent AHDB planting survey showed that in England 1.61m ha of wheat has been planted, which is 5% less than the area harvested in 2016. This means that there will be a bigger area to plant this spring, so good weather is required now.
Winter barley planting in England and Wales is also down by 2% on last year and the fall in winter barley area will be more than made up with the extra spring barley that is predicted to be drilled in the next few weeks.
The downside of that is, just how much it will compete with Scottish malting crops and just how much will the huge English acreage influence barley prices later this year. There’s quite a lot hanging on the outcome.
That said, the reduced wheat area prompted a little spurt in prices – UK May, 2017, old crop wheat futures rose by 1% on the week to close at £149.15 per tonne and November, 2017, new crop futures rose by 2% to close at £141.55, which is a negative carry of £7.60. UK prices saw some support from the weakening sterling, which dropped by 1% last week against both the euro and US dollar.
That means UK May wheat futures have increased by more than £20 or 17% since the beginning of the season, which started on July 1, 2016, peaking in mid-January at £150 per tonne. This is in part due to currency but also UK supply and demand along with some global markets as well. 
Chicago wheat futures – the main barometer for the world wheat market – have fallen so far this season in dollar terms. Since July 1, the May, 2017, contract has dropped $11.84 up to February 24. 
In general, plentiful supplies due to the fourth consecutive global grain surplus in 2016-17 has been the main reason for this and is the first time it has happened since 1999. Instead of supporting the rise in UK markets, world market factors are pulling down commodity values, so the rise in UK prices is due to other factors strong enough to offset poor world market prices.
One reason for the rise in UK prices has been currency. This meant that UK wheat has gone from being the cheapest to the most expensive in the world over the last year, though this is also due to UK supply and demand related issues. 
As a result, UK prices have risen around £23 per tonne compared to Chicago prices and £13 relative to Paris futures, mainly because the world trades in dollars. Also, UK markets have been tight, re supply and demand, resulting in prices rising.
Nearby UK wheat futures have now reached a premium of almost £17.30 over nearby Chicago wheat futures, as at February 24 and back in December, this premium reached just short of £30 per tonne. In the past, we have seen the UK wheat futures reaching a premium of around £40 per tonne.
Historically, UK wheat futures don’t trade above Paris wheat futures and this unusual trend could be related to the quality issues with last summer’s French crop and not just the tighter UK situation.
This could all add another element to UK wheat prices for the rest of the season and will largely depend on how much unsold wheat is left on farm. The negative carry is causing a disincentive to store wheat into next season and could force prices down as farmers try to find a home for their wheat in the next three to four months and compete against imported wheat.
UK ex-farm prices have remained steady with bread milling wheat up 50p to £146.20 and feed wheat up £1 to £145.80, so only a milling premium of 40p and feed barley up 70p to £121.40, a discount to feed wheat of £24.40.
Southern Hemisphere crops are appearing to be bigger than expected as Brazil’s soyabean harvest is approximately half way through and forecasts are for good yields and an increase in output of 4m tonnes to 108m tonnes. 
However, with an 11% increase in palm production predicted this year and Chinese crush margins hitting an eight-year low, soya values decreased this past week. In the second half of the year, they will again be under pressure as stocks rebuild – price falls of between 12% and 20% are expected.