Grain prices in 2009/10 have been much below the level of the previous two years. During the months before Easter, wheat prices drifted further along, with good news about the area planted for the coming harvest and the condition of crops emerging from winter; consequently expectations are for a large world crop in 2010.
So you could be forgiven for expecting grain prices to be lower in the autumn of 2010 than they were in 2009. Yet current market prices indicate the reverse is true: HGCA recorded bread wheat prices in the bellwether Liverpool region at £130-135/tonne in November 2009, and today’s forward quotation is around £145 so what is going on?
There are several factors, says Nabim’s Alex Waugh: the falling exchange rate tends to push up the sterling value of crops, which are traded internationally in dollars; although a large world wheat crop is anticipated, there is extra demand in the UK from the new biofuel plants (Ensus on Teeside is already functioning and a further plant is expected to start up in 2011). This means UK supply and demand will be more finely balanced, which could support firmer prices.
At this time of year, grain markets are always affected by weather stories and fluctuate accordingly. But current market conditions suggest it might be optimistic to build post-harvest plans on the expectation of cheaper grain than in 2009.