Firmer grain markets on quality fears

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Wheat prices firmed again this week as fears for maize and milling wheat quality boosted futures prices in the US and in Europe. However there has been high level of fund activity recently and the market is still very sensitive to any news on the global economic outlook.

A rise in US spring wheat futures helped the London feed wheat futures November 2011 contract gain ground to close at £170/t on Tuesday, its highest price for two months.

With rain forecast until the end of the week for Germany, the quality of remaining crops there is likely to be downgraded. Analyst Agritel reports that 20% of the German wheat crop is still to be harvested, mainly from the main export growing region in the north of the country.

USDA’s latest crop report released earlier this week further downgraded the condition of maize, spring wheat and soyabean crops, pushing up December 2011 maize futures by almost 3% in a day to a new high for the contract.

UK milling wheat premiums have stabilised at £20 to £25/t for full spec breadmaking wheat with 13% protein, 250 Hagberg and 76kg/hl, said Mark Smith, grain director at Saxon Grain.

Low protein, low Hagberg milling wheats were worth £8 to £10/t more than feed, while soft biscuit wheats premiums were £5 to £8/t.

The UK would have a smaller than usual exportable wheat surplus, said Frontier’s Jon Duffy, although it was too early to determine its size. "While quality is variable, it is on the whole good, so there shouldn’t be a problem with that. Competitiveness will be the issue."

Russian wheat is still very competitively priced and snapping up export sales to Egypt but it has firmed recently so that the gap between the cost of Russian and French grain has halved since new crop exports began. Ukraine has remained quiet so far but with 30% more grain than last year’s crop, is expected to enter the export market in October.

Russia is midway through its cereal harvest which Agritel reports is likely to reach 85 to 90m tonnes against 61m tonnes last year and 97m tonnes in 2009.

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