The prospects for this year’s British wheat crop continue to look difficult, but beyond the UK the outlook for wheat in 2013/14 is fairly positive - and prices are likely to fall.

Although conditions in the UK, the US and parts of Australia remain tough, most major wheat crops around the world are in good shape so far, according to a new Macquarie report out this week.

Crucially, production in the former Soviet Union is expected to improve significantly this year, taking pressure off global wheat supplies and driving down prices.

“From a global prospective, the world is highly likely to return to a wheat surplus in the 13/14 season,” said the bank.

Orange juice and durum wheat up sharply

Orange juice and durum wheat are responsible for the sharpest month-on-month increases in our commodities tracker.

Lower durum wheat supplies from the EU continue to keep prices up, with global output now forecast at 35.1 million tonnes, down by 5% from last season.

Meanwhile, concerns about citrus greening in Florida continue to keep the OJ market on edge, with prices moving up 6.6% in the past four weeks.

UK electricity prices have returned to more normal levels, recovering from the highs seen during the early part of 2013 as a result of low temperatures. At £53.41/MWh, electricity prices are down 16.5% month-on-month, although they remain elevated on a year-on-year basis, by 14.3%

Improved production from the former Soviet Union would coincide with improved supplies from the EU, which Macquarie forecast would hit 131.5 million tonnes this season - up from 124.4 million tonnes in 2012/13.

This would mean increased competition for export markets, such as North Africa - and a probable fall in prices, the bank argued. “The outlook for growth in EU stocks and their requirement to become competitive against Black Sea origin offers will necessitate the fall in MATIF wheat prices,” it said.

The picture couldn’t be more different for the UK, which Nabim fears could produce just 13.1 million tonnes in 2012/13 compared with the 15 million produced in 2011/12 (see Lead Analysis p12). Macquarie had a similarly bleak outlook: “Most of the EU should see a recovery in production this season from the issues of last year - the only crop that likely remains under pressure is in the UK,” it said.

With UK wheat supplies so tight, there could not be a worse time to have a 100% British pledge. Many suppliers, including Hovis, have already all but abandoned their pledges they are unlikely to be the last.