By Robert Harris

MORE UK wheat futures prices will be available from early July, giving a much better guide to forward crop values.

This should allow growers to sell grain more effectively and budget for input costs.

LIFFE the London futures exchange plans to offer grain contracts for the whole 2001/02 marketing year from next week, several months sooner than usual for more distant positions.

The move follows requests from farmer groups and our realisation that the UK is becoming increasingly exposed to world markets, says futures broker Bob Moore of REFCO Overseas.

The intervention price, especially for the 2001/02 crop year, has become a crash safety net, and the UK has to compete with other global players at world market prices.

The Chicago Board of Trade has had December 2001 futures prices up for three months, he says. And the Paris-based MATIF exchange is quoting values through to January 2002.

UK growers and merchants need to have some idea of how the market is pricing their grain that far ahead.

At the moment, traders can buy only limited volumes of 2001/02 grain. One way is to match purchases already made by consumers, but tonnage is small, says Gerald Mason of the Home-Grown Cereals Authority.

The other way is to hedge against Chicago futures, but there are risks.

“Currency could move the wrong way, or export taxes could be introduced by Brussels. So it is not terribly easy to buy without a London futures contract.

More than 40% of UK grain sales are tied up in some form of futures-related scheme, adds Mr Moore. Growers will now be able to discuss forward prices with buyers earlier, and perhaps secure better returns, he adds.

The December 2001 Chicago price is 10% higher than for December this year, so growers may be able to squeeze an extra 4-5/t by selling forward.

Whatever the actual value, it indicates the world price may have bottomed out.

Malcolm Shepherd, of Somerset-based Wessex Grain, who lobbied hard for the change, says it is essential for the industry to adopt other ways of managing price risk once the UK starts trading at world market prices.

We expect that the LIFFE wheat futures contracts will be directly related to Chicago prices, after adjustment for currency and quality factors.

“The opportunities for traders to buy and sell London and Chicago contracts will increase the liquidity of the markets and ultimately create more marketing choices for UK farmers.

Farmers should be able to plan more accurately too, says Mr Moore.

If I was buying seeds, sprays or fertilisers for next season and saw November 2001 wheat at, say, 70/t, I would be much more confident in my budgeting.