By Robert Harris
BETTER-than-expected wheat exports from the UK during the first half of the trading year and a smaller harvest than originally thought could see domestic supply tighten in the April-June period next year, says the Home-Grown Cereals Authority.
By the end of September, over 800,000 tonnes of wheat had been shipped abroad, notes economist Steve Thornhill. “That is well above what most people predicted. And we hear that shippers have got plenty on the books – by Christmas, between 2 million and 2.5m tonnes could go out. It wont take much business to be done in the first quarter of the year for end-of-season supplies to tighten.”
Two recently released harvest estimates add weight to that theory, says Mr Thornhill. MAFF figures put the wheat crop at 15.4m tonnes, just 150,000 tonnes below the NFU punt. Ministry estimates have been very accurate in recent years, he adds, and this seasons is 500,000 tonnes below some trade estimates.
Animal feed usage also appears to be as good as last year, heading for 600,000 tonnes, a contrast to earlier forecasts which suggested pig and poultry use would decline sharply. Cereal inclusion rates are higher than last year, due to the lower cost, he adds. “All this suggests that export availability, rather than exceeding 4m tonnes, could perhaps be 3.5m tonnes or even lower.”
Mark Buckingham of Banks Agriculture agrees. “The critical factor is the lower supply suggested by MAFF. Exports have slowed down a bit, and are likely to make just under 2m tonnes by Christmas.”
Sterlings strength will largely determine future export success. “We are bumping along the ceiling where we are competitive. We certainly have the goods that Spain and Italy need. But as soon as the Pound rises, or farmers stop selling, we become uncompetitive, and lose business.”
Farmers must, therefore, continue to supply the market, he adds. “The market is not on the launchpad. But better prospects could mean a Pound here or there, and a better carry after Christmas.”
Although much forward export business may have been pencilled in, shippers can always sell back the right to export if it looks more attractive to source supplies elsewhere, cautions Glencore Grains Angela Gibson. “The wheat may not necessarily be exported basis UK.”
Feed wheat price for November is worth about £75/t ex-farm, pushed up slightly by a weaker Pound and some shorts in consumer and shipper markets, says Mr Buckingham. Good prices are available from millers who need urgent supplies, he adds.
- MAFF figures put cereal output 3% down on 97, FWi Markets, 22 October, 1998
- NFU predicts smaller harvest, FWi Markets, 29 September, 1998