19 August 1997

UK wheat surplus down but exports look shaky

By Philip Clarke

By Philip Clarke

EXPORTERS will have about 1m tonnes less wheat to shift this season, following a significant drop in the UKs surplus.

Despite a 3% increase in the area just harvested, both Allied Grain and Dalgety have marked the crop down on last years 16.1m tonnes record to just 14.8m tonnes and 15.04m tonnes respectively, reflecting a 10% yield drop.

After allowing for increased imports (especially of Class 3 milling wheats) and slightly reduced domestic demand, Allied puts the export surplus for 1997/98 at 3.26m tonnes, with Dalgety projecting a slightly bigger 3.51m tonnes.

Last year the UK shipped a record 4.58m tonnes, according to Dalgety. But both merchants are adamant that clearing this years smaller surplus will not be easy.

"Price and quality are the two key factors which determine our ability to export grain," says Dalgety crop marketing manager, Gary Hutchings. "Under the current market conditions, we are far from confident that we can come remotely close to last years performance."

According to Dalgety, UK wheat is currently too expensive to pick up fresh export business. But the greater concern is quality. "Some areas will struggle to achieve the minimum feed standard of 72kg/hl, let alone an acceptable export standard."

In addition, exports are likely to be thwarted by a conservative approach from the commission towards subsidies, especially following US threats to reintroduce their Export Enhancement Programme.

As such, the company has pencilled in just 1.5m tonnes of sales to EU destinations and a mere 500,000t to Third countries – less than half last years totals. That leaves another 1.5m tonnes still to find a home.

"While the prospects for exports do not look particularly buoyant, we do believe the market will align itself," says Mr Hutchings. At what price remains to be seen.

These views are echoed by Allied Grain shipping director Mark Hughes, who says this weeks ex-farm price of £84/t is driven by domestic compounders and millers, and makes the UK a "non-player" in the export game.

Exports to the end of September, at 550,000t, are expected to be 40% behind last year. "We have precious little business on our books for the coming months. Were just too expensive," says Mr Hughes.

Despite this, he believes Dalgetys export predictions are "a bit light", especially to Spain and Portugal which have smaller crops. But sales will only pick up if:

&#8226 Sterling weakens further, making UK wheat more competitive.

&#8226 Continental prices firm.

&#8226 Brussels starts a heavy export programme to Third countries.

The last of these is unlikely, says Mr Hughes, though Brussels did remove its export tax on wheat last week. But there is some scope for price rises on the Continent if world prices improve.

The best chance for farmers, however, comes from sterling which is enjoying a period of relative weakness. As such, further price rises for UK farmers later in the season are not dismissed.n

Almost 60,000t of wheat was loaded onto the MV Belchatow last week at Allied Grains Tilbury facility – a UK record. But, despite the decent start, shippers warn clearing this years surplus wont be plain sailing.