7 June 2002

Is UK on course to clear extra wheat surplus?

By Olivia Cooper

AFTER months of falling wheat prices, the UK has finally become export competitive, helping old crop values to rebound by £2-3/t over the past week.

The re-introduction of export refunds from Brussels three weeks ago put a base in the EU market, while the k has also risen to 20-month highs against the £, favouring UK prices.

Richard Whitlock, grain director at Banks Cargill, says exports to the EU have picked up considerably in the past month, and the UK could clear the small surplus that has forced wheat futures down by over £20/t since January.

Mr Whitlock estimates there is now just 150,000-200,000t left to export. "By the end of the campaign, the UK will have emptied the surplus stocks to normal carryover levels."

But Gerald Mason, chief economist for the Home Grown Cereals Authority, says a production sampling error of up to 300,000t means the figures are too close to call. A slightly early or late harvest could have just as much impact, he adds. And although spot values have risen to about £60/t ex-farm, harvest has begun in Spain, narrowing further opportunities.

New crop prices have also lifted slightly, due to enquiries from overseas milling wheat buyers. Full specification soft milling wheat is worth about £2/t premium over feed wheat for October/ November, at about £61/t ex-farm. That equates to about £2/t below French soft wheat values, and £20/t above Black Sea feed wheat – stressing the importance of a good quality harvest.

Meanwhile, heavy rain in the Ukraine has diminished hopes that a drought could affect its wheat and barley crops. &#42