17 April 1997

HGCA advice to growers – sell some new crop grain now

By Robert Harris

CEREAL growers should consider selling some new crop wheat and barley now, even though prices may well be below production costs, says the Home-Grown Cereals Authority.

The trade sees little sign of a price rise, given the continuing strong £ and good crop prospects in the UK and abroad. The hope is for good quality to secure exports.

Prices will remain at or even below current levels, says the HGCAs Gerald Mason. "It is difficult to see anything positive in the market. Growers should not bank on sterling weakening, and we are looking at a possible record crop in the UK."

Ministry December census figures confirm a 1.5% rise in winter wheat plantings, which at an average yield of 7.9t/ha will produce 16.3m tonnes, slightly above the record 1996 crop. And this seasons forward wheat crops have plenty of potential given fair weather between June and August, he adds.

With no increase in domestic demand likely, Mr Mason predicts the amount of exportable wheat could be nearly 1m tonnes up on this year, at 4.3m tonnes.

Recent International Grains Council figures forecast world production in 1998/99 at 593m tonnes, 15m tonnes below last years record. But world trade is expected to remain fairly static at 98m tonnes. "To remain competitive, we might see further discounting on new crop prices yet," says Mr Mason.

That could see harvest values, currently about £67-£68/t, slip £2-£3/t, and bring October values below £70/t, says Mr Mason. "It is difficult, but farmers could lose more if they wait to sell."

Cargills Chris Toft agrees there is little sign of a rise in prices, but cautions against haste. "Everything revolves around quality, and there has been an increase in Class 2 wheat plantings this season."

A weather problem in one of the worlds main grain producing countries could change prospects, he maintains. "It is foolish to talk numbers at this stage. Farmers may want to wait and see before selling."

Robert Kerr, of Glencore Grain, says November new crop is at a premium of about £4/t to todays market, and is range bound; if the market rises £2-£3, it will struggle to find buyers, and if it weakens, there will be few sellers.

But good quality wheat could stand a rise of about £2/t and still compete against French crop on export markets. "The discount is currently about twice that."

Currency and quality are the great unknowns, he says. Farmers should budget, make a price marker, and sell some crop when the value coincides. "Farmers that came early to the market last year found it easier. It does not pay to chase yesterdays market." &#42