Grain prices on increase after sluggish start
After a sluggish start to the year, grain prices have been rising again, almost reaching the highs of 2012, writes John Franklin.

Feed wheat has been leading the way, seeing prices locally above £210 per tonne, with good demand coming from UK feed mills. On the other hand, milling wheat premiums have decreased, with most UK millers now using large quantities of imported high grade wheat for their bread flour production due to the inconsistency of the UK crop, and with low availability of soft milling wheat, it can only be a matter of time before millers turn to the continent for all raw materials required for biscuit flour.
One of the country's leading flour millers is already buying 90 per cent of its raw materials from Europe and, with still over half a year to go before the next UK harvest, this may mean a major shift in mill requirements for home grown milling wheat – not necessarily good for the UK milling wheat grower who still has 2012 crop to sell.
Barley continues to cling onto wheat's coat-tail, trading at a discount of £5 to £15 behind wheat depending on customer requirements. Milling oats sales have been quiet of late but are expected to be busier when cereal manufacturers have used their Scandinavian imports; hopefully this will be by the end of the first quarter.
Oil seed rape returns have seen an increase of £25 per tonne since the start of the year with February spot prices around £380/tonne plus oil bonus. It has been reported China imported 2.93MMT of rapeseed in 2012, an increase of 132.1 per cent on the previous year, although presently banned from supplying the Chinese, predictions are Canola from Australia may fill their requirements later this year. If this is the case there is a greater chance of European exports to other areas normally supplied from Australia. China has seen a major import rise in most commodities. China's 2012 soybean imports meanwhile were 58.38 MMT, up 10.9 per cent on 2011. Imports from the US were 25.97 MMT, up 16.62 per cent. Imports from Brazil were at 23.89 MMT, up 15.85%.
On the world stage Chicago's futures markets are dominated by world supply, demand stories and weather worries worldwide and, like the wind, these seem to change daily. For instance, South America has now reported dryness issues while it wasn't very long ago that Argentina and Brazil were awash with floods. This may not initially concern the UK arable grower but does create tremendous financial interest from fund managers, who in turn move the Chicago grains market either up or down depending on the position they take. This will generally be reflected in the London/Paris futures markets, and followed by grain and oilseed traders across Europe who base ex-farm values on exchange prices.
UK grains prices continue to hold at these high levels. Growers' expectations are of higher prices into spring, but with record milling wheat imports and lack of export, this may not happen. But if winter planting continues to be weather-delayed prices will undoubtedly continue to remain extremely firm.
John Franklin, is senior trader at Grainlink Ltd