Rising global wheat prices and domestic planting issues have given London feed wheat futures a 16% boost on September prices.
UK wheat exports lost momentum in November with only 67,700 tonnes exported compared with 257,000 tonnes in the previous month.
Transport strikes in France are limiting the volume of supplies reaching port facilities.
What to watch
As Egypt paid $5 per tonne more for its latest wheat tender, rumours of a possible wheat export restriction surfaced out of Russia.
London May wheat futures closed on Thursday at £155.50 per tonne, a rise of 1.0% week on week.
Paris March wheat futures settled at E193.00 a tonne, up 0.7% week on week.
Paris May rapeseed futures closed at E403.00 a tonne, down 3.2% week on week
UK wheat at a fresh six-month high
What a start to the new decade for the UK grain markets.
In the wake of rising global wheat prices and domestic planting issues for the 2020 harvest, London feed wheat futures enjoyed a further 3.8% (£6-per-tonne) rally from last Wednesday or about 16% (£22 per tonne) since early September.
New crop prices are also on the rise, standing at their highest level since 2013 for this time of the season.
Another wet week has gone by and farmers have still have not had a chance to progress with their winter wheat drillings which are estimated to be about 60% complete nationally - a very busy spring is coming up.
The 2020 UK wheat harvest could end up at its lowest level since the early 1980s, below the psychological 10m-tonne mark.
The UK is therefore set to return to a net importer position through the 2020-21 marketing season.
Consequently, the premium of December 2020 Paris Euronext milling wheat over November 2020 London LIFFE feed wheat (new crop) has tumbled from E20 per tonne in early October to a negative E4 per tonne. This is, Paris wheat trading below UK wheat.
Anecdotally, HMRC released its monthly trade update and as expected, UK wheat exports have lost momentum in November with only 67,700 tonnes exported compared with 257,000 tonnes in the previous month when the UK should have left the EU
Cumulatively though, UK wheat exports between July and November stood at more than 740,000 tonnes versus just 130,000 tonnes last season.
Benjamin Bodart, CRM AgriCommodities
Transport disruption gives commodity prices added support
European markets waited for last Friday’s USDA report and are now waiting for the details to emerge after the China-US trade deal signed on Wednesday this week.
Various domestic markets have been dealing with internal issues – especially in France where the general strikes have hit day 41.
Reports vary, but with transport disruption, domestic values for physical commodities needed to load ships have found some added support and are believed to be helping support the Paris futures markets.
With Brussels unable to publish any exported commodity data since December 23, the trade is relying on ships seen in port, which adds to another uncertainty as to how to read the relevant commodities balance sheet.
With such issues, trying to second guess where the markets move from here remains difficult.
Confidence will build over time, especially as spring approaches and hopefully remaining crops get drilled and those that have overwintered show how good their establishment is.
Cecilia Pryce, Openfield
US-China phase one signing underpins positive market sentiment
The US Department of Agriculture reported few surprises last Friday as US and global wheat numbers, albeit down month on month, came much in line with trade expectations.
The market now awaits to see if the signing of phase one of the US-China trade deal translates into a surge of Chinese buying of US agricultural products.
US traders believe China will step up its buying of US soybeans, maize and soft red winter wheat, although the balance sheet would suggest there is not much of the last available to sell.
However, trade assumptions and optimism have seen markets rise, although a firmer US dollar and talk of higher crops and stocks for 2020 have limited gains.
The general lack of ex-farm sales across much of the EU and the Black Sea region is adding to the market sentiment, leaving exporters struggling to find supplies.
This is not helped by a current transport strike in France, limiting the volume of supplies reaching port facilities and underpinning Paris futures and EU cash markets.
This week Egypt paid $5 per tonne more for its latest wheat tender (Russian and Romanian origin), and rumours of a possible wheat export restriction surfaced out of Russia, with talk of a 20m-tonne limit after January 31.
Whether this is a reflection of current stocks and concerns over dryness in the current crop, or purely a mechanism to be used if required, remains to be seen, although any talk of government restriction is deemed as supportive.
David Woodland, ADM Agriculture