1 August 1997

Short crop and falling £ boosts first wheat price

By Philip Clarke

SLIPPAGE in the value of sterling and a shortage of new crop supplies created a "sell opportunity" earlier this week as first cuts of wheat were taken.

The sharp drop in the £ – as the City took a less pessimistic view on interest rate rises – lifted feed wheat by £2 to £73/t for August delivery, with another £2/t premium for "off the combine" sales.

This is not expected to last for long, however, with many buyers still well covered with old crop, a good weather outlook for the weekend and sterling likely to rebound to its recent seven year high.

There is also some concern about crop quality, though early samples suggest this may be ill-founded.

Merchant BDR reports one lot of Hereward this week at 11.4% protein, 345 Hagberg, 79.5kg/hl specific weight and 13.5% moisture in East Anglia. Elsewhere, proteins have been surprisingly high with 12% for Hereward and Mercia and 11% for Soissons widely reported.

Milling wheat has seen improved premiums recently with Class 1 pushing out to £22/t over feed – equivalent to £96/t ex-farm. The smaller area grown and quality concerns have helped, says Dalgetys Gary Hutchins.

So far millers have taken little cover on new crop, as they have watched feed prices tumble. But there are now signs of some buying activity.

There are also opportunites for growers with old crop biscuit varieties, as merchants look to cover contracts made with millers earlier in the season. "Riband, Consort and Brigadier of known quality is all fetching a premium, though this will not last much longer," says BDRs Gary Starky.

But generally farmers are reluctant sellers. Even those who have to move grain off farm are looking for rented storage, in the hope of higher prices later on.

This strategy could pay off. World values have risen in recent weeks, fuelled by a weather market in the US. Wheat prices are now only at a $2 discount to the EU compared with $15/t last month.

"There are also comments from Australia that dry conditions could reduce their crop to 15m tonnes compared to last years 24m tonnes," says Mr Hutchins.

Crop damage in central Europe due to flooding (especially in Poland) is less significant – and could make matter worse if it results in downgraded supplies entering the EU as feed wheat.

But more encouraging is the news that Argentina has also reported lower winter wheat plantings as wet weather caused growers to switch into spring-sown soya. This could tighten supplies in the second half of the season.

Soissons winter wheat comes off at 7.4t/ha (3t/acre) at Berkyn Manor Farm, Horton, Berks, this week, producing a sample of over 13% protein.