By Robert Harris
CEREAL growers remain reluctant to sell new-crop wheat as prices come under renewed pressure.
With little sign of a sustained recovery, they face another tricky season, say traders.
“Less than 5% of potential new crop wheat has been sold at a fixed price so far,” says Banks Agricultures wheat director, Richard Whitlock. “That is a lot less than normal.”
Low prices are the main reason. November futures slipped to £75.10/t midweek, or £70-£72/t ex-farm, as the Euro slipped to its lowest level yet against the Pound.
That value is just 35p above the contract lows seen at the end of February, says Dalgetys Gary Hutchings.
The picture could still change. “Farmers need to keep their eyes on the fundamentals as the season unfolds to take a measured view of the market,” says Mr Whitlock.
Currency is the immediate problem. The Euro was worth just 64.4p on the foreign exchange markets on Wednesday morning, or well over DM3 for the first time since last July.
“The weakness of the k has been caused by an apparently faltering system,” says Mr Hutchings. “This is a follow-through after the earlier change of rules by the Central Bank to assist the Italians.”
Mr Whitlock suspects little will change. “Until Euroland addresses its economic shortcomings, the Euro will not be a strong currency.”
Old crop carryout, put at 1.6 million tonnes by Banks, could also depress the market. “That is 200,000t more than last season, but less than some trade estimates.
“I do not think production was as high as some think, and exports since February have been carrying on quite happily.”
Gerald Mason of the Home-Grown Cereals Authority suspects up to 400,000t more could be carried over than last season.
“It may seem odd, with old-crop prices still at the mid- to high-£70s. But I suspect there is more quality wheat in barns because of limited premiums.”
French intervention stores are also filling rapidly. Nearly 8m tonnes of wheat has been offered of which 5.3m tonnes has been accepted
Future third world business may concentrate on this, rather than free market grain, says Mr Hutchings.
“EU stocks could be close to 20m tonnes. And the ever-widening gap between the world market and the EU internal market was highlighted this week.
42.5/t (£27/t) to make it work was.”
On the plus side, the UK is planting more quality wheat, which should support export values, says Mr Whitlock.
There is likely to be less UK new crop, too. Winter wheat area is 6-7% down, and even allowing for higher spring plantings and improving yields, Mr Mason predicts about 14.5m tonnes, just under 1m tonnes less than last year.
The latest International Grains Council forecast puts global wheat consumption at 586m tonnes, exceeding production (of 568m tonnes) for the first time in three years.
Trade could be 6m tonnes higher as a result. “But most stocks are in the exporting countries, so competition will remain fierce,” notes Mr Mason.
Next season could be a repeat of this one, a market made up of reluctant sellers and reluctant buyers, traders conclude.