EU wheat yield forecasts saw downward revisions, but maize yields are looking good according to the latest European Commission MARS crop monitoring report.

At an EU-28 wide level, the total wheat yield is now forecast 2.4% below the five year average and a reduction of 0.2t/ha from the previous (June) report. The most adversely affected EU wheat yields are in countries boarding the Baltic and across northern and northern central Europe.

While wheat and barley yields have been negatively impacted by adverse conditions, grain maize yields have fared better.

Abundant rainfall in southern central and south-eastern Europe, where many large producing countries are located, has been advantageous for maize. The yield forecasts for Hungary, Romania and Bulgaria were revised upwards from the previous June report, while the French maize yield forecast remains above the 5-year average.

With a divergence in the yield forecasts for wheat and maize, the price difference between UK wheat futures (Nov-18) and Paris maize futures (Nov-18) has been widening. 

By markets’ close on Monday 23 July, UK wheat futures (Nov-18) were £18.97/t above Paris maize (Nov-18), the largest spread so far in the lifetime of the two contracts (read more here).

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Mind the Gap as UK Wheat jumps

There has been a recent rally in UK feed wheat futures, with the Nov-18 contract rising £10.00/t in the last 10 days. Having previously looked at the currency impact, today we look another of the driving forces behind why we have seen such a rise.

The premium that UK feed wheat futures (Nov-18) have over Paris milling wheat futures (Dec-18), increased throughout May, June and into July. The premium reached a maximum of £6.22/t on 9 July. However, following that high, the premium reduced and fell back to £2.65/t by close on Friday 20 July. The decline in the UK premium made European wheat comparatively more expensive.

With UK wheat production unlikely to allow a significant exportable surplus, the UK premium over European (and global) values will need to be maintained to prevent grain leaving the UK. Yesterday (23 July), the premium jumped back to £5.59/t as UK feed wheat Nov-18 futures rose more than Paris Dec-18 futures.

The need to keep a UK premium over European wheat places additional importance on monitoring European market conditions and currency movements. 

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