Monday Market Briefing - 8th January 2024

It’s the start of a new calendar year and often this means markets turning their attention to the forward positions with renewed interest. We still have a hefty price carry into new crop at current parities with spot wheat valued today some £20/mt below the Nov24 level. We know current prices are subdued by comfortable supply and what feels like a lack of demand -but the market is functioning in the nearby months it’s simply that consumers are not interested in committing to cover their forward requirements in the way they have always done in the past.

Given the higher forward prices, that caution seems sensible but those prices are there for a reason as confidence in the 2024 crop is pretty low. The atrocious planting conditions in major wheat regions across the northern hemisphere means a further significant tightening of world wheat stocks is all but guaranteed next season. One respected source in India suggests that wheat output there has been overstated by as much as 20 million tonnes in the last two years due to heat damaged harvests. India will soon need to rely on her blossoming relationship with Russia to meet future import needs.

Russia now controls more than 25% of all world wheat trade, a prospect you would think would be alarming after recent events. Not so apparently in the UK where the Government presides over a post Brexit farm policy that is now driving production lower at an accelerating pace. The 2024 harvest will be the 8th year in 12 where we produce less wheat than we will consume – a situation that only arose once in the preceding 12 years.

It’s going to be an interesting year, have a good week.