By Robert Harris
FEARS over wheat quality grew this week as rain put a stop to harvest in most areas.
The hope is that cutting can restart quickly to allow the UK to maintain parity with the firmer French market, says the trade.
“Our competitiveness hinges on producing a quality sample at least as good as the French,” says Dalgetys Gary Hutchings. “While it is early days we are beginning to err on the side of caution as we await the consequences of the poor weather.”
Only about 10-15% of the crop was cut before the weather closed in, but it was enough to suggest a big crop.
Unless the weather lifts soon, the UK could have a bigger exportable surplus than last years 3.25m tonnes, says Robert Kerr of Glencore Grain. “It could all end up in the feed heap, which shuts off some homes.”
A weather market has developed for those lucky enough to have some wheat in the bin, and values jumped to £75/t midweek for wheat available at buyers call, he adds. “But as available prices are still around £70/t.”
Nearly all the French crop has been cut, and quality is better than expected.
This, and a reluctance by farmers to sell, has pushed delivered wheat values at the port of Rouen to intervention levels, about £79/t, and £2-£3/t lower inland.
This is up £1-£2/t in recent weeks, and further support has come from the aggressive export stance taken by cereal market managers in Brussels recently.
Their decision to award export licences for almost 300,000t of free market (non-intervention) EU wheat, for export to Third countries, at the first meeting of the season last week, surprised the trade. And each tonne attracted a 30/t (£20/t) subsidy, allowing shippers to sell the wheat for about $100/t (£62/t) on the world market.
“It is pretty aggressive and an encouraging sign,” says Mr Kerr. “The commission appears quite happy to roll up its sleeves and export wheat out of Europe. Hopefully, this means it wont miss opportunities like it did last year.”
While most of that wheat will be French, it is still good news for UK farmers, he adds. “The best news for the UK – once the crop is in – is a boat loading in a UK port. The second best news is a boat loading in a French port. It all helps to reduce the pool, and will lend price support.”
Mr Hutchings describes the move as “pretty positive”. And the commission is keen to see business done quickly. By reducing the subsidy in stages over the licences four-month life, it will encourage spot trade. “Brussels is keen to convert these licences into real sales.”
Wheat import requirements have increased in many of the traditional EU markets this season, adds Gerald Mason of the Home-Grown Cereals Authority.
“Smaller east European and Turkish harvests mean the bargain basement sales from these regions could be limited, giving the EU the opportunity to take advantage of extra requirements in drought-hit Iran and N Africa.”
Indeed Iran has already bought 500,000t of French wheat in August, including 120,000t on Wednesday.
The EU has about 15m tonnes of wheat to sell to Third countries including about 6m tonnes from EU intervention stores, Mr Mason estimates. “But there is still some doubt whether the USA can sell wheat to Iran and Australian new crop will not be available until the New Year.”