5 September 1997

SEGREGATION FOR SUCCESS

Exports underpin the entire UK grain trade. So what are the prospects for getting crops away this season? Suzie Horne takes an early look at the facts affecting this crucial market

IN a year when harvests across Europe are reported as variable, the UKs ability to segregate grain will prove invaluable.

"It is going to be important to monitor what comes off the combine," says Alan Almond, director of British Cereal Exports. "Quality is the big question. We could end up with a big market for wheat with milling and baking potential.

"We could also see a big price differential between wheat qualities. If there is a good uniform crop, that will mean lots of export opportunities."

Increased plantings mean there is a potential to export 6m tonnes this season, even though yields may be lower than in 1996. Last season, over 6.5m tonnes of UK grain was exported to more than 50 destinations, wheat accounting for more than two-thirds of that.

Of the £30/t price drop for this years crop, about £22 is accounted for by currency factors. The strong £ has forced UK domestic prices down, but Dr Almond hopes the sterling problem will not get any worse.

However, the general tone of the market will be related to the value of sterling and the world market.

EU yields down

Opportunities for UK wheat will continue mainly in exporting to other EU member states. "In Southern Europe yields have been disappointing, down by as much as 20% on last year," says Dr Almond.

Spain, Italy and Portugal are seen as offering the greatest potential for UK wheat exports, with good trade links already established.

"Italy is at least 10% down and with variable quality as well. Both Spain and Italy will use UK grown Consort and Riband in their breadmaking grists and varieties like Charger will also be suitable. In a mixed year, it is important that we can separate out the good stuff."

Latest Home Grown Cereals Authority market information confirms the situation in the southern European states. Soft wheat output in Italy is an estimated 16% down on 1996 and durum wheat down by 13%. Wheat and barley drop by 25 and 21%, respectively, in Spain and by 30 and 40% in Portugal, which had its worst winter drought for 150 years.

The attitude of the EU Commission to exports will determine what level of third country trade is achieved.

"The Commission is waiting until harvest is completed before making any longer-term policy decisions," reckons Dr Almond. "Low prices early in the season are encouraging compounders to buy and get their needs covered.

"The commission could argue that its indecision is indirectly increasing export prices in the longer term while protecting compounders at this early stage in the season. Why fight for export business now when we can do better later on? And in any case growers are reluctant to sell at this stage."

The commission has been restricting third country exports early in the season by imposing export taxes. The trade put in large bids for export licences at a small (0.5ecus/t) standing tax, and these were rejected.

Despite raising the tax to 3 ecus/t, traders still put in bids for almost 500,000t of wheat exports. While these bids were accepted, the tax was then doubled to 6 ecus/t, which dampened their enthusiasm.

The market for wheat with good specifications and some baking potential could be an interesting one, says Dr Almond. "Millers are very concerned about the acreage of Group 1 wheats, but are finding that they can use group 2 wheats like Charger and Rialto, for example. It is a question of whether the Hagberg will hold up."

At the time of writing in mid-August, UK wheats were competitively placed against the French crop, but were at parity with Danish prices.

Feed prospects

High world stocks of malt and barley make the barley export market a lacklustre one. But maltsters and exporters cannot hold off forever, and there will be opportunities for substantial feed barley exports.

Spanish and Portuguese imports of barley will increase as domestic on farm consumption of barley rises this season, predicts the HGCA.

Groundwork by BCE means Chinese buyers are now familiar with what the UK offers, and Dr Almond hopes that grouping of some of the new varieties will help to achieve sales to this destination in the not too distant future.

BCE is now half way through a three-year programme researching malting barley markets. This will support UK exporters in their efforts to open up new markets for malting barley. Possible new customers include maltsters in South America and Eastern Europe.n

Grain quality will make all the difference to sale prospects this season, both at home and abroad. Trade advice is to store batches separately on-farm wherever possible.

If it has milling potential it could find a happy home in Europe for a whole range of grists. Disappointing harvest results throughout Europe are raising export hopes later this season.

An estimated 6.5m-tonne UKgrain surplus makes it more important than ever that export homes are found for this years crop.

EXPORT POTENTIAL

&#8226 6m tonne surplus – 6.5m tonne 1996/97.

&#8226 Variable EU harvest boosts prospects.

&#8226 Segregate by quality where possible to assist sales.

&#8226 Milling wheat best prospects.

&#8226 High world malt and barley stocks mean poor demand.

&#8226 Scope for substantial feed barley exports.