18 September 1998

EU subsidies crucial to wheat export success

By Robert Harris

EXPORTERS will have to ship about a quarter of a million tonnes more wheat this year than last, according to national merchant Dalgety. Early signs are hopeful, but much depends on Brussels encouraging Third World trade.

About 4.25m tonnes will have to be shipped abroad by next June to balance the books, due to a UK crop of 15.95m tonnes, the second largest ever. The company puts average yield across 2.044m ha (5.05m acres) at 7.8t/ha (3.16t/acre).

Quality is much better this season, judging by the 80% of wheat cut before the rain. UK grain is also competitively priced and demand looks likely to increase, says crop marketing development manager Gary Hutchings.

"Milling wheat quality looks excellent, and feed wheat bushel weights average 74kg/hl, up to 5kg/hl better in the north than last year. The one notable exception is the south-west which caught really wet weather."

Last year, poor quality meant the UK had to cut prices to tempt buyers. It also had to realign prices to compete with France, the main competitor. But this autumns prices are already at the necessary $5-6/t (£3-3.60) discount.

About 800,000t of wheat is destined to be shipped by the end of September. "Thats a pretty brisk start." As far as Europe is concerned, he reckons some 3m tonnes of business has already been pencilled in. Spain and Portugal are likely to take 950,000t and 350,000t respectively. Italy should account for 550,000t, Germany half that.

A further 750,000t has been earmarked for third world trade. Flood-hit Bangladesh may buy 300,000t, and several North African countries a further 200,000t. However, actual trade volume will depend on the willingness of the European Commission to grant subsidies.

"Its strategy is crucial to the success or otherwise of this years campaign," says Mr Hutchings.

"Early indications would suggest the Commission is indeed in a mood to compete if bids for export subsidies are sensible. They have issued over 1.5m tonnes of free market wheat licenses compared with 950,000t this time last year."

However, each tonne leaving the EU costs more than $35/t (£21) in subsidies, $21/t (£13) more than last year, due to a dramatic slump in the world price which is now at a 21 year low.

Such subsidies may not be sustainable given current budgetary pressures. Recent political fallout due to the 30,000t of barley shipped from Finland to California is also a timely reminder that Brussels cannot afford to overstep the mark with subsidies, he adds. &#42