UK feed wheat at near 11-month high; EU milling wheat, corn at over two-month high

31.10.2016

UK feed wheat reached a near 11-month high Thursday at Eur155.65/mt, up Eur5.76 week on week.

Looking at it from a pound perspective, the figure amounts to GBP139.50/mt, a more than two-year high.

EU milling wheat and corn also reached over two-month highs at Eur164.50/mt and Eur166/mt, an increase of Eur1.50 and Eur6.50, respectively, from Wednesday.

This has resulted in some tightness for ethanol margins, although they remain at healthy levels. The feed wheat crush spread dropped Eur3.05 week on week to Eur61.23/mt, while the EU corn crush spread fell Eur5.05 to Eur33.30/mt. However, the EU milling wheat crush spread gained Eur8.45 to Eur37.35/mt.

Much of UK pricing lately has been heavily influenced by currency fluctuations, so nominal increases in prices may not fully reflect changes in fundamentals. However, the relative weakness of the pound versus the euro has rendered imports more expensive for UK-based consumers, so any previous wheat imports may now be substituted by UK feed wheat.

In addition, a source from the grains market said that although yields have not been great in the UK, the quality of wheat has been good, especially compared with France, where the harvest has been bad and quality issues have been reported. This is also reflected in low milling premiums, suggesting stronger demand for UK feed wheat.

Poor harvests in Northwest Europe have impacted all feedstocks, creating tightness in supply, but the sugar market in particular is seeing shortness globally, causing sugar prices to soar. LIFFE 5 sugar was assessed at $597.30/mt, up $3.60 week on the week. With sugar stocks at historic lows, higher sugar prices are leading to some tightness in the French and German ethanol markets as producers divert beet to sugar rather than ethanol production.

"If you look at sugar prices today, if you're a plant that has the ability to produce sugar or ethanol, I wouldn't be producing ethanol," an ethanol producer said.

The S&P Global Platts estimate of sugar as a feedstock for ethanol is 1.3 million mt of white-sugar equivalent for the 2016-17 campaign. That figure could now see some downward revision.


platts

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