History tells us that no market keeps going in a straight line, whether that is up or down, forever. Sooner or later it has to stop, if just to draw breath, then it may continue increasing or fall back. Certainly since my last article, it has gone only one way – up.

My parting shot last month was: “If you’ve missed that last market high, don’t worry, it will come back again and may be higher than the last peak.” Well it’s done that alright, with UK November wheat futures trading on 30 September at £5 more than the previous high point. Before this September we have seen previous market highs which then fell by £15, only to recover later and always higher than the last peak. That’s the part that no one can guarantee.

You know my view has always been that the eventual peak would be reached sometime between January and June on wheat. But, on feed wheat and barley, for pre-Christmas, the largest part of the increase is already in the price and if movement and cash flow are important for October and November, then these are good prices to be “wrong” at.

The increase I expect in January/June wheat still depends on the real size of the UK wheat crop. I still say that at 14 million tonnes or less, we are likely to need imports of feed as well as milling wheat for January to June. If we do, you can add £15 to forward wheat prices, so my earlier prediction of £200 ex-farm for new year feed wheat could be on. I also said that the milling wheat market needed time to develop. Well now it has, with UK millers taking down to 12% protein, 200 hagberg and 74 kgs. I think they will need to derogate further than that, especially with German ‘A’ wheat at £270 at the port; there is still some room for improvement with premiums.
However, malting barley may well have reached its peak, with premiums of £50 over feed. Only once before, around 2011/2012, have we seen these values and then the UK had nothing like the exportable surplus it has this year. Even allowing for low bushel weights and average yields at best, the UK should have a surplus of at least 1 million, maybe up to 1.5 million, tonnes of barley.

We have already begun our export programme for malting barley and feed. Logistically, with 3,000 to 4,000 metric tonne coasters, it will be difficult to export more than 350,000 to 400,000 tonnes as malting. That implies a surplus of malting which our domestic maltsters should be pleased to buy.
So barley is the one to sell. Malting: Because of the high price, if you have good storage and quality take the bigger premium for the new year. Feed: Sell if you need pre-Christmas movement.

In the new year, if I am right about the feed wheat, feed barley may be carried up with it. The United States Department of Agriculture has just surprised the trade by reporting both US corn and soya stocks at higher figures than expected, but we still await production figures for this year. So, if we get a bigger world maize crop than expected, that could affect the price of feed barley. Ukraine is the most likely source of maize that could be cheap enough to come into Europe.

If you were looking for other “bearish straws in the wind”, suppose the second ethanol plant didn’t start producing in January? That could turn even a 14 million tonne wheat crop into a surplus of some sort, to avoid feed wheat imports. So, the warning from history remains that no market continues to go up all the time, except perhaps for oilseed rape, with its clear lack of supply and inelastic demand.

So, there we have it. It’s a good time to be a merchant or grain producer, as the higher values should offset some lower yields. On some days the UK could be the cheapest wheat in the world, so it all looks rosy, but it could be that it will be non-grain related fundamentals that change the market. Compounders, millers, maltsters have all had a pasting with these high prices. They will get their turn one day; like the market, nothing goes in the same direction forever.