12 April 2002

Grain price falls in reaction to news

WHEAT prices have dropped in reaction to the announcement from Viking Cereals.

London May futures lost £2.25/t on Monday and another 75p/t on Tuesday, with 1365 lots (136,500t) of old crop traded over the two days. But levels had recovered by 25p/t as farmers weekly went to press Wednesday.

Opinions are split as to the reasons for the fall. Rumours abound that Viking has a considerable amount of wheat to sell, which the receivers may offload fairly quickly. Some merchants say the initial £2/t drop on Monday was caused by these sales, while others reckon it was a trade reaction, getting in early before the storm.

Richard Whitlock, of Banks Cargill, says: "Its uncertainty causing the problems."

Physical prices have fallen to about £64/t ex-farm, but there is very little being sold at this level, says Glencore Grain trader Robert Kerr. The UK is now almost export-competitive, but demand is poor, and there is still a £10/t drop into new crop, he adds.

However, supply could get tight towards the end of the season, although prices will depend on the number of buyers in the market at that time.

New crop values have remained steady at about £62/t ex-farm for November. This is cheap compared with US wheat, but is still £5/t above Ukrainian feed wheat offered into the Mediterranean.

This is traditionally a UK market. But exports tend to be milling wheat, so they dont necessarily have to compete on equal terms, says Mr Kerr. &#42