21 March 1997

Grain rallies as £ takes fall

ELECTION fever sent sterling tumbling early this week, prompting a rally in cereal prices.

As a result, traders were advising farmers to shift sheds still full of grain.

"A sell opportunity for sure," says Glencore Grains Robert Kerr, having seen feed wheat ex-farm prices for June reach £100/t. Thats £10/t higher than the mid-February low, he points out.

Sterling on Tuesday, at DM 2.67, was 4% weaker than a fortnight earlier, improving export competitiveness for UK grain. But by Wednesday evening, it had rallied to DM 2.69, and grain traders were reporting slightly weaker prices.

This trend was reflected on the futures exchange, with May feed wheat jumping £1.40/t on Monday and another 90p on Tuesday to £102/t, then dropping back slightly on Wednesday.

But a strong regional market has emerged, with prices in the Eastern counties setting the pace, and Cargills Simon Lock also advises farmers to sell. The market could run out of steam if overseas buyers hold off and wait for new crop, he says.

But Viking Cereals David Balderson says that this late in the season, what grain is left on farm is in "strong hands" and people may still resist selling.

Currency and sentiment have pushed new crop values up, too, he adds. November feed wheat, at £95/t, is about £5/t above the market low.

There has, however, been a negligible amount traded compared with previous years due to low prices and drought fears, he says.