UK must exploit the cereal export market
By Olivia Cooper
GLOBAL cereal supply figures have been revised down to their lowest for many years, with bad weather affecting production in both hemispheres.
But European stocks are plentiful, and unless exports pick up, UK farmers could be faced with even poorer prices.
The International Grains Council cut its monthly estimate of coarse grain production by 30m tonnes last week, to the lowest level since 1995. Crops are being affected by drought in the US, Canada and Australia, and by floods in Europe.
The IGC also cut its wheat estimate, by 7m tonnes to 568m tonnes, but there are still large availabilities of feed wheat in the EU and central and Eastern Europe, it says. "Supplies of higher protein wheat will become particularly tight. But sales, mainly of medium and lower-quality wheat, by Ukraine, Russia and India will be large."
Julian Bell, market economist at the Home-Grown Cereals Authority, says UK feed wheat is not competitively priced, and exports are falling behind the pace required to shift the 4m tonne surplus.
"There are grounds for a certain amount of optimism, but unless we get our shipping to a certain level, were putting more and more pressure on what might happen."
Richard Whitlock, wheat director at Banks Cargill, agrees, but blames the poor trade on a lack of farmer selling. Although growers are busy on the land, and dont like the prices, merchants cannot sell without guaranteed supplies. "I just see business opportunities going past us, week after week.
"This is very, very worrying. It is a mirror image of last year. If we dont start to compete in the export market then that burden is going to become bigger and bigger." To date, the UK has about 200,000-300,000t on the books for August and September, instead of the 800,000t that should have been sold.
Spot feed wheat is worth about £52/t ex-farm, about £4/t too expensive against Black Sea and Russian wheat. But soft and hard milling wheat is competitive, with good quality softs fetching a £4/t premium.
"We can sell more, as long as we have more people willing to sell to us," says Mr Whitlock.
Group 1 milling wheat has risen by £8/t over the past fortnight, to about £72/t, but is still attracting good demand. Premiums are also available for a wide range of specifications, with millers taking anything down to about 11% protein, 150 Hagberg and 73kg/hl. *
UK wheat must start to compete on export markets soon, warn traders.