Strengthening futures’ market for wheat supply

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A strengthening futures’ market could make it feasible to store 2014 wheat well into the new season, according Agricultural and Horticultural and Development Board (AHDB) analyst Jack Watts.

“The November 2015 feed wheat futures have recently reached a £10/t premium over the May 2015 spot price. Usually, the new crop price is at a discount to the spot price,” he said.

“The closest comparable situation was last seen in 2008/09, which was also driven by a record UK wheat crop. Current market conditions are creating an economic incentive for farmers and commercial store keepers to keep feed wheat in store and sell into the next marketing season, rather than clearing stores ahead of the harvest.”

Whether individual businesses decide to hold onto the 2014 crop largely depends on cash flow and storage constraints. Stored grain ties up working capital that a business may need to release. Ongoing storage requires continued management and can cause logistical issues at harvest to ensure old and new crops are segregated.

Watts is advising those with grain in store now to devise a relevant plan, which includes both storage and cash flow management.

“The objective is to put them in a strong position, so as to get the most out of this current market opportunity,” he said.

In relation to managing stores, AHDB is urging growers to follow its guidance on grain storage and sampling.

Home Grown Cereals Authority research manager Dr Dhan Bhandari points out that investment in stored grain started with store preparation last year and store maintenance activities over the winter months.