Price prospects for the rest of the 2008 wheat crop are not looking buoyant against the background of the large, poor quality, UK harvest and ample supplies in the EU and Black Sea, says farm business consultant Andersons.
The picture of ample supply following the 2008 harvest is similar globally, but particularly in and around the EU, depressing UK values further, says Andersons’ head of business research Francis Mordaunt.
“Large volumes of UK grain have already been sold, either as storage was tight or grain was too wet to store safely. This depressed prices post harvest. Now much of this has been sold, values may pick up in the New Year, especially if Sterling continues its fall against the euro.
“For farmers still with grain in store now, it is worth noting that if sterling hadn’t fallen since September 2008 against the euro and dollar, the value of UK wheat would now be back to below £70/t.”
There are encouraging premiums available for quality wheat samples, too, as millers relax protein specifications.
The prospects at this stage for the 2009 harvest are more positive, with a smaller UK exportable surplus likely, says Mr Mordaunt.
“However, cost of production has probably risen to at least £120 per tonne for most producers and currently feed wheat at harvest 2009 is no more than £100/t. Around the world production is likely to be down in 2009 from lower planted areas, but also lower yields because of inability to finance inputs. Therefore, depending on global conditions, a revival of price in 2009 is a distinct possibility.”
Milling wheat premiums have been good in 2008 for producers with the quality, but base price for those not on contracts has disappointed some. Premium crops involve extra costs of production, so without the required quality results have been poor, says Mr Mordaunt.
“Malting barley needs to meet maltsters’ specification to be really profitable and those on fixed price contracts will have done well in 2008. There is plenty of malting barley available in Europe and those selling at feed price plus malting premiums have been disappointed. For 2009, it seems prudent not to take a gamble on achieveing quality specification. Even those growers who have consuistently managed this, long term contracts will provide welcome reassurance.”