The UK wheat market has slowed down with the approaching holiday season making simple logistics like finding lorries for transport more difficult, while currency moves make price developments uncertain and there is little pressure on sellers to move supplies.
Longer term, the closure of the Vivergo ethanol plant, for now at least, has put a question mark over domestic wheat demand. Elsewhere Russia continues to dominate export markets, with winter weather there not yet bad enough to stop shipments.
Logistics is a problem, Gleadell Agriculture trader David Woodland told Agritrade News. “Some time ago there seemed a reluctance from a lot of the big merchants to put anymore on because they had a lot of commitments, without the seasonal hassle of farmers not being able to load.”
Currency was adding uncertainty, with sterling rising and falling according to the latest Brexit news. “Longer term there seems more willingness for supplies to be offered into the trade than for spot, but at the right premium,” he explained. “There is no sign of distress sellers yet.”
“We know one of the ethanol plants has shut down for maintenance work,” Mr Woodland noted, referring to Vivergo. The question was when it would re-open, if at all. “If it doesn’t re-open again, then it becomes a game changer on the UK wheat balance sheet,” he said.
Continental exporters lacked demand. “France continues to knock over their traditional North African homes,” he said. “Lack of supply, lack of quality wheat because of harvest problems is stunting the kind of exports that are coming out of Germany and the better quality wheat now coming out of the Baltic States is hard to find.” The market was dominated by exports from the Black Sea, especially Russia. Weather there has been mild, allowing shipments of grain to continue.
Mr Woodland reckoned that the USDA was still overstating likely EU exports by three million tonnes and “probably slightly underestimating the Russian volume. By the end of the year, one will probably negate the other,” he predicted. The world picture was little changed, with ample supplies of wheat. “And really, at the end of the year, the focus will quickly go off the old crop, because in most cases it’s done and dusted,” he said.
“The only real technical support in the market is the Chicago funds, holding record short positions in wheat and corn,” Mr Woodland noted. “At what stage has it got to be unwound? The question is, when do they start to bank the profit?”
The UK market is quiet and likely to stay that way into the New Year. “There’s no great incentive to sell, or many buyers queuing up, so the market is going to grind on for some time yet, unless something dramatically changes, weather wise or in market dynamics.
“Really the old crop is done and dusted,” he concluded. “There are going to be more than ample supplies of all commodities. The question then is how will the weather affect the new crop?”