A month has passed already this year and there has been little improvement in the weather with another two named storms which brought severe winds and damage to many areas yet again.

Temperatures have not been as extreme, but we have seen some very cold spells and even a record 19.6C or 67F last weekend at Kinlochewe which is the highest ever winter temperature recorded in Scotland following the previous high of 18.3C in Aberdeenshire in 2003.

As land is still very wet there has been little work done in the fields and wheat production in the UK will be down on last year as the AHDB Early Bird Survey carried out last November indicated a 3% drop in wheat planted area due to the wet autumn which has continued and another survey is being done in March to get up-to-date information as to how low the wheat area will be for this year.

Wheat futures

This past week, UK wheat futures have fallen to new contract lows despite support for US and European wheat markets.

UK feed wheat prices remain around £10.00 too high to be able to compete for export market share and to date only 130,000t has been exported in the first half of the season, 71% less than last year at this time, which means there will be a potential carryover of up to 3mt of wheat into next season compared to nearly 2mt at the end of 2022-23.

Forecasts are for only 275,000 tonnes of wheat to be exported in 2023-24 which would be the lowest since 209,000t in 2020-21.

The surplus is not being helped by less demand in the animal feed and ethanol sectors and this all contributes to prices falling even further.

This is reflected in the liffee feed wheat futures where May 2024 old crop futures stand at £179.40/t which is a contract low, down 7% in January alone which is £10.00 down from two weeks ago and down £17.00 from four weeks ago.

November 2024 new crop futures currently stand at £195.35 down £7.00 from two weeks ago and £13.00 from four weeks past.

This means there is the opportunity, with a price carry of £16.00/t to sell any unsold wheat into next season provided there is available space and funds available to do so. This carry is the largest for the time of year in recent years and highlights the difference in expected UK supplies this season as well as for next season.

With less wheat planted area this year any decrease in tonnage will be offset by an increase in UK wheat imports which currently stand at 1.725mt.

Most of this tonnage is expected to be high protein milling wheat due to the lack of high-quality wheat from this past harvest due to the poor weather.

Currency power

One of the main factors affecting global grain markets is currency which has seen a strong euro against the US dollar but recently the euro has weakened 1.1% against the dollar and this will help Europe to compete more aggressively on the global export market which will help European grain prices.

Up to the middle of January the EU had exported 17.3mt of wheat but is still behind last season which at this time had moved 18.7mt and is forecast to export nearly 32mt.

The EU has so far imported 5.4mt of wheat of which 3.65mt have come from Ukraine and the EU has already imported 79% of its full season forecast compared to just 51% at this time last year.

There are signs that the Black Sea exports are beginning to ease as the gap between EU and Russian prices has narrowed as Egypt bought French wheat for the first time in five months this past week.

Russian exports

The 2023 Russian wheat crop was estimated at 91mt which was just below last year’s record and by the end of January Russia will have exported more than 30mt which would be 15% more than the first seven months of 2022-23.

Russia is forecast to export more than 48mt this year and to hit that target Russia would need to export around 3.7mt each month from February to June which is down from the average of 4.3mt per month so far this year.

Ukraine exports could drop by 20% due to the issues around the Suez Canal and in the Red Sea, this could mean greater opportunities for EU exports and UK prices for the remainder of the 2023-24 season although there is still a large tonnage of Russian wheat to export.

Around 12% of global trade is routed through the Suez Canal.

Re-routing this trade adds around 10 days and associated additional costs to journeys so this will impact the UK over the coming weeks and months.

US wheat planted area is forecast to be 49.6m acres for 2023-24 and their maize area at 94.6m acres and US maize stocks will be over 20mt higher than at the start of the season at a total of almost 55mt which is enough to meet a third of the US annual animal feed demand.

US wheat exports for this season to date total 16.1mt, 4% ahead of last year and just 18% of the US wheat export total estimate remains unsold.

World wheat stocks are now forecast at 260mt, and this total would be down 11.5mt on last year.

Taking into account China’s record 288.8mt maize crop, world maize production is up 14.7mt from last month, which is up 80mt on last year and year-end stocks are up by 25mt which offsets the drop for wheat’s 11.5mt reduction from the previous year.

Domestic drop

UK feed barley prices continue to fall having followed the wheat markets down in recent weeks and has kept the price discount to wheat similar to what it has been which continues to keep barley being used in feed rations.

Old crop malting barley prices continue to trade at a good premium over feed barley.

Looking forward to new crop, due to the poor autumn planting season, the UK will have an increase in spring barley throughout the country and this could put 2024 malting barley premiums under pressure as buyers will have a larger than normal tonnage to purchase from.

Due to reduced exports and a potential larger crop this year, this will leave the heaviest ending stocks since 2014-15 compared to oats with average exports leading to the smallest ending stocks since 2012-13.

Oilseed rape prices have increased over the past two weeks as European crushers look to take further supplies as price increases has lead

to some on-farm sales as prices rose to £250-£360/t ex-farm partly due as well to extra shipping time avoiding the Red Sea creating sudden demand.

World rapeseed crushing is estimated to have hit a record of more than 75mt in 2023. This is due to high production levels across the world as well as rapeseed oil being very price competitive, which has increased the demand.

Urea fertiliser prices have firmed over the last few weeks as some machines have been able to travel in the fields and global buying is also increasing prices.

Due to earlier low demand, nitrogen factories are still not producing any material but CF industries have released terms which look good value against imported AN and urea values.

UK demand will gradually increase and as supplies to the UK remain tight prices are expected to pick up as demand increases.

Due to excess winter rainfall nitrogen and nitrogen sulphur requirements will be greater than normal as the potential levels of available nitrogen in soils could be very low.