By Robert Harris
NEW-crop cereal prices have slipped to a two-decade low, and the trade believes the only real hope of recovery in the coming season is a weaker Pound.
Despite farmers beliefs that more sunshine is needed to boost crop potential, trade predictions of a big crop remain. New crop wheat was worth about £64-£65/ t ex-farm midweek, and new crop barley £2-£3/ t less, depending on location. October-December movement is valued at £5-£6/ t more.
Even that may not last, says David Walker of the Home-Grown Cereals Authority. “Wheat could fall below the barley price if quality is poor. We could then get into an intervention situation.”
Recently HGCA planting figures show a rise in the wheat area of 0.7%. That suggests there is 2.04m ha of wheat in the ground.
At an average yield of 7.9t/ha, that would produce 16.1m tonnes of grain, as in 1996. With little change in domestic demand, that equates to 4-4.5 million tonnes of exportable surplus.
Early indications are that the Spanish crop is good, which could reduce its need for UK wheat; it took 1.5 million tonnes this season, says Dalgetys Gary Hutchings: “The barley harvest was 9-9.5 million tonnes, much bigger than last year. First reports suggest there may be a quality problem with milling wheat, but that will only add to the feed wheat pile.”
The French also have a big crop in the ground, and may have to export 4 million tonnes more than this season (see p37).
The world market looks little better. Recent deals are setting a low benchmark for world prices, says Mr Hutchings. Iraq has bought 500,000t of wheat from Australia for about $108/ t. Problems in south-east Asia, which accounts for a third of the world wheat market, will add to price pressure. The main hope is for good quality, says the HGCAs Gerald Mason. “At least it would mean we would not have to trade at a discount to make our wheat competitive.”
Glencore Grains Harry North reckons Sterlings recent rise has pressured markets. “There is a lot of harvest movement grain to be sold. Farmers have been reluctant to sell in a weak market.” Prices could dip further at harvest, though by how much is open to question, he adds. “When farmers have to sell big tonnages to make room, consumers tend to back the price off somewhat. This is what we are heading for.”
Farmers should consider taking some cover on forward sales for the autumn, with October-December wheat worth £71-£72 now, he adds. “They could easily be chasing £70/ t all season.”