19 July 2002

Big wheat crop raises fears for price next year

By Olivia Cooper

HARVEST might have started at last, but the prospects of a bumper wheat crop have already prompted trade fears about next years harvest price.

Gary Sharkey, wheat director at Grainfarmers, reckons this seasons large wheat crop could have a significant influence on next years markets. The UK is expected to produce about 5m tonnes more wheat than in 2001, with an exportable surplus of 4m tonnes.

"A lot can happen, but it will depend on how much stock we carry out from this year into next. We need to get off to a running start on exports this season – it is imperative that we have a good quality harvest." If the surplus is not cleared by the end of the crop year, it could depress 2003 prices, he adds.

Gerald Mason, chief economist at the Home-Grown Cereals Authority, says farmers should stop trying to predict the market and sell grain at target levels based on production costs. "There are no guarantees to what happens to prices any more, which is why it is increasingly important to think about what price you need.

"If you dont start looking at the values right from the moment they become available, you reduce the chances of receiving that target price."

New crop prices have been available for seven months, so forward planning the 2003 crop marketing campaign could be beneficial, he says. Producers who sold this years wheat crop forward would have beaten current spot values by more than £20/t.

Few farmers will find £62/t ex-farm for feed wheat in November 2003 attractive. If this doesnt cover costs of production, producers could lock into a minimum price contract to alleviate risk, while allowing them to benefit from subsequent rises in the market, says Mr Mason.

A tool that could be useful for this years harvest is fixing milling wheat premiums while leaving the base price open, says Mr Sharkey. Top quality Group 1 milling wheat is now worth £11/t over feed, but with a potential 1.5-1.6m tonne milling wheat surplus, this could fall, he adds. "It will depend on the quality and quantity, but we could see milling wheat premiums fall by £2-3/t."

Predictably, the markets hardly squeaked as this years harvest got underway and although it is too early for a true picture on quality and quantity, indications point to good barley yields (see Arable p49).

Spot feed barley is worth about £51/t, although growers could get about £10/t more when intervention opens in November. Feed wheat has remained steady at about £55/t ex-farm for harvest and £59/t for November movement. &#42

Harvest kicks off at Castle Farm Partnership, Amberley, West Sussex, with Siberia winter barley. The crop yielded between 7.4t-9.8t/ha (3-4t/acre), says farmer Paul Strudwick. But the trade already has concerns about next years market.