19 January 1996

New statistics pressure grain

GRAIN prices came under continued pressure this week, following the publication of a number of new statistics.

On old crop, MAFF has revised downwards its official estimate of wheat usage by feed compounders this season by some 250,000t, so boosting the export surplus to 3.1m tonnes.

With an estimated 1.4m tonnes still to shift, the Home-Grown Cereals Authority estimates that over half will have to go to Third Countries. Following recent releases of intervention grain for Spain, and cut-price imports of maize and sorghum, demand from that key market is certainly drying up.

But last weeks Brussels decision to grant export licences for Third Country business on just 6500t of wheat with a £7.28/t tax was not encouraging. Ex-farm prices have, therefore, continued to weaken.

"It is still possible to get £120/t for wheat, but that is now the March value," says Richard Whitlock of Banks of Sandy.

Other bearish factors include the value of sterling, which has continued to strengthen this week, and the drop in US wheat values following publication (on Jan 16) of US Department of Agriculture figures pointing to a 7% increase in their winter wheat area.

But farmers are still reluctant sellers. A survey by Banks this week suggests that, while Hants farmers have just 20% still to trade, those in Lincolnshire have about 40%. This is in contrast to France, where co-ops are now more aggressive sellers, says Mr Whitlock.

According to merchant Dalgety, UK wheat is now at parity with French grain, which makes it uncompetitive when freight differentials are considered. Dalgety also believes new crop is overvalued. It projects an 8% increase in the EUs 1996 harvest to 190m tonnes.