27 September 1996

Subsidies for grain exports

GRAIN markets are firmer, following a Brussels decision to grant export subsidies for the first time in over a year.

As FARMERS WEEKLY went to Press on Wednesday, ex-farm wheat was trading at about £104/t, some £3 up on the week.

This followed last weeks allocation of export subsidies worth £4.14/t for some 237,000t of EU wheat. Though this was used to cover a previous sale of French grain to Egypt, traders are taking it as a sign that the Commission is about to start a more active export policy.

But the volume of grain to shift is considerable. Latest figures put the EU crop at over 200m tonnes, 23m tonnes more than last season.

"Brussels has a window of opportunity between now and Christmas," said David Balderson of Viking Cereals. "If it misses it, we will then be in the swim with southern hemisphere countries, fighting for market share in the new year."

But, with the US already complaining about the Commissions return to subsidies, and with Brussels keen to see some rebuilding of intervention stocks before the end of the season, traders are not anticipating an overtly aggressive export policy. Further price rises could be limited.

On the barley side, prices have firmed about £4 to £102/t in the last week, following the granting of export subsidies worth £21/t, and a major purchase by Saudi Arabia of 1.7m tonnes from "any origin". Dalgety believes over 300,000t of this could come from the UK, supporting the barley market in the short term.

But with such a small differential now between wheat and barley, compounders are likely to switch to wheat when booking forward cover for the new year.