14 July 1995

High milling premiums if quality wheat scarce

THIS coming season could see milling premiums of £18-£20 over feed as the UK continues to operate a deficit of quality wheats.

Out of an estimated crop of 14.1m tonnes for 1995/96 just 1.9m tonnes are expected to be of Class 1 varieties, according to wheat director of Rank Hovis McDougall, Peter Jones. Against a domestic milling demand of 3.3m tonnes, and with imports expected to rise to 850,000t, there is a shortfall of more than 500,000t.

"The difference is made up with other wheats such as Soissons," said Mr Jones. "But we cant rely on these Class 2 varieties repeating last years performance." Then, Class 1, 2 and 3 wheats all milled well and led to domestic supplies taking an 83% share of the national grist compared with 70% the previous season.

Much still depends on what quality emerges at harvest. As such, premium predictions of £18 to £20/t are speculative. But, with the feed wheat market currently setting a very firm base, RHM fully expects to be paying more for its raw materials this season, putting a strain on margins.

French feed wheat is currently trading at £10/t over intervention, there is almost no carry-over of old-crop milling wheat, and Spain could be taking up to 1.5m tonnes of UK wheat this season, complained Mr Jones.

"Brussels aim is to get wheat prices down, but, with no stocks to speak of, goodness knows how it will do it," he added. He was also critical of the recent decision to send emergency grain from northern Europe to drought-stricken Spain, while UK millers struggled to find end-of-season supplies.

Against this volatile background, and with area aid and set-aside payments continuing to interrupt the flow of grain off farms, RHM is looking to do more business on contract.

&#8226 RHM made a much improved contribution to its parent company, Tomkins, in the year to April 1995. Profits from milling and baking increased from £22m to £33m (up 49%) on lower sales of £666m due to higher bread prices. &#42