Wheat-market standoff as the Pound climbs again
By FWi Staff
WHEAT markets have plummeted dramatically from their peak 10 days ago, despite producers continuing to hold back on selling.
“The higher prices made the UK uncompetitive on export markets, while encouraging growers bullish instincts to delay selling,” said Mark Buckingham of Banks Agriculture.
Consumers are estimated to have covered about 85% of their pre-Christmas requirements, noted Ian Wallis of Cargill plc. “And if farm sales pick up as the drilling season ends, further pressure on current values may arise.”
“Producers looking to move wheat before the New Year should therefore consider hedging some tonnage at current values to avoid any pressure that may result from a new wave of grain sales,” Suggests Mr Wallis.
With prices now £3/tonne off their top, selling has ceased, said independent grain broker, Jeremy Cole. “There is a stand-off as many producers have received their IACS payments and are in no hurry to sell as they have some cash.
“Trade reports all say that they have covered themselves up to Christmas. However, they may have paper sales, but merchants have not yet completely covered themselves off-farm.”
Sterling reached a six-week high against the DM towards the end of last week at DM2.8170, and wheat futures prices inevitably finished lower, noted the Home-Grown Cereals Authority.
“Sterling gains from any strength in the Dollar as one of the few other relatively safe currencies, and the Dollars recent strength could go some way to Sterling moving against the interest rate moves we have seen recently.”
However, Sterling fell against the DM yesterday (Monday), and UK futures at LIFFE gained 10-50p on the back of it.
Bread-making wheat prices fell over £2 to £92.50/tonne, as did other milling wheat, which dropped to £80.40/tonne. Feed and other wheat also slumped to about £76.20/tonne.
The picture looks slightly better after Christmas, predicted Mr Cole. “Next year the situation should be more bullish. With lower interest rates and a lower Pound things could improve.
“However, it all depends on world markets,” he warns. “We need world prices to increase as weve already met French prices making us less competitive. We are waiting for some factor to break the stalemate.”