15 September 1995

Allied harvest forecast is not so optimistic

By Philip Clarke

HARVEST estimates from Allied Grain point to a tighter cereal market than equivalent figures from rival merchant, Dalgety.

But both agree the quality is excellent and will satisfy domestic and export demand, so long as sterling remains competitive against French, German and Danish currencies.

Allied puts UK wheat production at 13.82m tonnes compared with 14.17m tonnes from Dalgety. The Allied figure is some 500,000t more than last year due to the 2.4% area increase and a 1.4% yield increase. Dalgety reckons there is nearer 900,000t more wheat in the system, following some very high yields in the north.

The crop would have been larger still if moisture levels had been higher, says Allied. But with much of it cut at less than 13%, the 1995 harvest was only the seventh biggest on record.

After accounting for depleted intervention and commercial stocks, and allowing for increased human consumption, Allied puts the total export surplus at 2.8m tonnes – just 150,000t more than last year.

With wheat markets fundamentally tight, group managing director Ian Douglas expects the current "bull run" to continue in the short term. But he is less optimistic about future Brussels policy.

"EU markets are very strong now. The Commission cannot be comfortable knowing the effect this will have on livestock farmers," he says. "As such, they have two options – to stop Third country sales altogether by suspending export licences, or to put a tax on exports."

The latter is looking increasingly likely as world wheat prices continue to rise.

Rain damage to the US spring crop, drought in parts of Australia and the strengthening US$ are all stoking the market. (Indeed an export tax was imposed on wheat flour last week.)

While such a tax would put a cap on EU grain prices, the other option, suspending all export licences, would force them down.

But Dalgety trader Trevor Harriman believes this is less likely. "It would be very damaging for the EU, and France in particular, if it were to lose traditional markets in Algeria and Morocco." Any ban on exports would be done selectively, he suggests.

In barley area

On the barley side of the equation, Allied suggests a crop of 6.74m tonnes – some 800,000t more than last year, but less than the 6.9m tonnes estimated by Dalgety. This is the largest barley crop for three years and is the first time production has risen in 10.

&#8226 Some of the discrepancies bet- ween the two sets of figures reflect the different sampling methods. Allieds estimates are based on grain going over a weighbridge set against the contracted acreage. Dalgety analyses returns from over 1000 farmers. The NFUs harvest estimate, which last year was the most accurate (see table), is expected imminently.


1994 harvest estimates – who came closest?

MAFFAlliedDalgetyNFUUKASTA

(Final)GrainAgriculture

Wheat13.3113.60 +2.1% 13.55 +1.8%13.28 -0.2%13.45 +1.1%

Barley5.95 5.28 -11.2%5.57 -6.3%5.67 -4.6%5.67 -4.6%

Oats/0.690.65 -5.2%0.64 -6.7%0.64 -6.7% 0.61 -11.1%

other

Total19.94 19.53 -2.1%19.76 -0.9%19.59 -1.8%19.73 –1.1%

NB. MAFF Final figures were published in July 1995