17 May 2002

Doubts over maize crop in US could help wheat price

By Olivia Cooper

WORLD wheat prices could gain some support as uncertainty over the US maize crop grows.

Maize plantings in the US have fallen behind due to wet weather, with 62% planted by May 12 compared with a five-year average of 72%. Yield is now likely to be affected, and farmers may consider swapping to soyabeans if drilling is not complete by May 20, says the Home-Grown Cereals Authority. This could result in a smaller harvest than the 252m tonnes predicted.

"At the moment no one is expecting a major problem," says market economist Gerald Mason. But international grain markets are beginning to focus on the potential maize crop, he adds. "Prices could change very dramatically and very quickly."

The sheer size of the crop makes it the benchmark for grain markets across the globe. World coarse grain production is forecast by the US Department of Agriculture to be 905m tonnes, of which the US supplies almost 30%. This compares with a world wheat crop of just 596m tonnes.

Maize not only dictates world feed prices, but also the availability of wheat for exports. If maize becomes too expensive, US farmers may feed their soft red winter wheat instead, which could open world markets to grain from other countries, including the UK, says Mr Mason.

UK old crop wheat prices continue to fall amid poor consumer demand. Feed wheat has weakened by about £2/t over the past fortnight, to about £63/t ex-farm, and is closing the gap on new crop values. Harvest prices are unchanged at around £55/t.

However, prospects for the new crop marketing year could improve. Dalgety trader Trevor Harriman reckons the EU might be more likely to grant export refunds following the passing of the US Farm Bill last month which gives farmers an extra $45bn (£31bn) over the next six years.

The EU has criticised the bill as a hidden export support payment, which could make them more likely to revise the way export refunds are calculated, says Mr Harriman. &#42