18 February 2000

MAFFdata says grain output set for big increase

By Robert Harris

WHEAT production is set to climb sharply this coming harvest, according to provisional MAFF figures released this week which show English farmers have drilled the biggest area for a decade.

The survey of 15,000 holdings gives the trade its first firm feel of crop size. It suggests 1.96m ha (4.84m acres) was sown by Dec 1. Barley drillings also rose to 529,000ha (1.31m acres).

Although that suggests an 18% rise in wheat area compared with the previous year, last autumn was more open. "Unlike 1998, almost everyone would have been drilled up," says Dalgetys Barry Barker. "We are going for a 12% increase."

Gerald Mason of the Home-Grown Cereals Authority agrees. "The actual area is important. Include the likely Scottish area and the spring crop, and we could be looking at 2.1m hectares."

Dalgety predicts a crop of 16.5-17m tonnes, leaving 4-5m tonnes available for export.

A 10-year trend yield of 8.03t/ha (3.25t/acre) would produce 16.7m tonnes, 1.5m tonnes more than this year, says Mr Mason. That suggests at least 4m tonnes of exports, though it is too early to be specific, he stresses.

But the prospect of more wheat is likely to cap ex-farm values. One hope is that the world price, based on US soft red winter wheat, climbs above the EU intervention price, removing the export subsidy cushion, dragging UK values with it.

The current new crop position suggests Brussels will only need to subsidise EU wheat by k8-k9/t (about £5/t) to compete on world markets, says Dalgetys Gary Hutchings. "The internal market is very close to the external world market. Overlay the fact that the latter appears to be finding support, and you could see that gap closing."

Forward values could also benefit, says Mr Mason. Dry weather in the US wheat belt, coupled with talk of food aid programmes, has pushed US values to $116/t on board ship. That puts French wheat at £70/t, equating to a UK ex-farm price in the low £60s.

"Any further rise in US wheat could create a good forward selling opportunity for new crop," says Mr Mason. "Farmers should keep a close eye on the market."

Old crop values remain stagnant, at £67-£69/t depending on location. Although about 2m tonnes has been exported, and a further 350,000t has been pencilled in for February and March, that still leaves 650,000t to ship.

"The market is in balance at the moment," says Robert Kerr of Glencore Grain. "If March is a big month, we could see some light." &#42