8 March 1996

Late grain rally No 4:Hopes fading fast…

By Philip Clarke

PROSPECTS of an end-of-season grain rally, as has occurred in the last three seasons, are fast diminishing.

Feed wheat values continued to slide this week to about £113/t ex-farm spot. That compares with £132/t it could have made had it been sold forward last November. It also represents a £2/t fall on the week, and an £8/t drop since the beginning of February.

The reasons behind the collapse are not hard to fathom.

"Although UK export prices are competitive, third country business remains stifled by the commissions restrictive export policy," says the Home-Grown Cereals Authority.

Last week Brussels gave export licences for just 55,000t of wheat, carrying an export tax of £11/t. This left EU grain uncompetitive on world markets.

Market managers are clearly planning for a flow of wheat back into intervention stores in the next few months. Indeed, the commissions latest EU balance sheet pencils in a carryover of 8m tonnes to next season, compared with just 4.5m t currently in intervention.

Merchants are not dismissing the possibility of a late season price rally.

Having specified a month ago that Brussels would only allow another 2m tonnes out of the EU this season, last week farm commissioner Franz Fischler hinted this could be raised.

End of season

"But if it does rally, it will only be at the very end of the season," predicts Dalgetys Gary Hutchings. "It would require a strong nerve to wait till then."

With up to 750,000t of the UKs 3.1m tonnes wheat export surplus to sell, and no obvious buyers (despite being £3/t cheaper than the French), Usborne trader Nick Oakhill expects the market to drift further.

The recent strengthening of sterling and the large volume of grain still on-farm are adding to this bearish sentiment.

As such, an end-of-season rally could turn into an end-of-season collapse, unless farmers start releasing grain now, warn traders.

Viking Cereals trader David Balderson says some growers are clearly rattled by recent trends. "I am aware of some farmers who have not sold a single tonne this season. Those with bread wheat have really taken a hammering as the feed price has dropped almost £20 and the milling premium another £10/t since the peak."

As each week passes, the chance of an end-of-season rally diminishes, he says.

"Brussels missed the chance to win any of the 800,000t barley business with Saudi Arabia a week ago. It is ridiculous that, when the worlds biggest barley buyer comes to market, the EU is not even there at the table."

A silage bale provides a makeshift table for Malcolm Wakeling at Mondays sale of fodder near Leighton Buzzard, Beds. Terry Hall (left) paid £1100 for 102 silage bales. Top call in this section was £13.50 a bale. Small-baled hay sold between £3 and £3.30 a bale; barley straw at about 60p a bale; and a "surprisingly strong" interest in wheat straw took prices to 60p a bale. (Abbott Anstey Reader)