Shortage in feed supplies to hit producer margins
UK wheat futures prices have risen to £149/tonne, up 50% since the end of June when they were less than £100/tonne. Soya, Rapemeal and Sugar Beet prices have also risen in the last month in response to concerns over supply shortages.
Latest forecasts published this week by the USDA highlight the decline in production amongst the main wheat exporters. Production forecasts have been revised down as a result of continuing abnormal weather conditions in Russia, Europe, Canada and parts of the USA.
Russia and the wider Former Soviet Union (FSU) accounted for over 25 per cent of the total world wheat exports in 2009/10 and provided the lowest price source of wheat on the world market. As a result of the recently imposed export ban on Russian grain exports, and production issues in the EU and USA, global wheat prices have already rallied almost 50% in US dollars as for the first time in three years the world will consume more wheat than it grows. Fears of food inflation and a tighter global supply will most likely see stockpiling in countries with large wheat reserves rather than large volumes being released to the market to ease the situation.
Analysts expect demand for feed wheat to subsequently fall as prices become increasingly unpalatable to livestock producers. Producers looking for alternative winter feed options will find that prices of other livestock feeds have also increased.
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