Midweek market report - 31st July 2019

Harvest halted by poor weather as markets react to fluctuating currency

With the UK wheat harvest underway, our domestic market this week has been dominated by sterling volatility and patchy weather.

At the weekend, the new UK Prime Minister signalled the real possibility of a no-deal Brexit which rattled currency markets and caused sterling to drop 2% in value compared to the euro. However, sterling's losses added value to wheat and London futures gained up to £3 per tonne at their highs on Tuesday.

Nevertheless, there are concerns that a no-deal Brexit could lead to the UK excluding itself from some of its traditional markets within the EU as impositions of tariffs would make it an uneconomic flow. The importance of securing a quality wheat crop would be vital to maintain exports to premium milling markets into North Africa. More farmers across the South of England had started to harvest their wheat before unwanted rain on Tuesday brought a halt to proceedings. Excellent early quality was reported, with specific weights above 80kgs and hagbergs above 300. However, the forecasted wet weather is an increasing concern for ripe crops and uncertainty around this is supporting milling premiums. Capturing quality is key for maximising the volume of home grown wheat that our millers can use and, as mentioned, competing in milling wheat markets outside of Europe.

In the meantime, European and world markets have slipped lower. Recently, analysts have cut their wheat crop estimates for Russia but, this week, the Institute for Agricultural Market Studies (IKAR) increased their estimate by 300,000 tonnes to 76.4 million tonnes.

France is now set to produce its second highest wheat crop ever with analyst, Stratégie Grains increasing their French soft wheat crop to 39 million tonnes up from 34 million tonnes last year.

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