By Olivia Cooper
THIS seasons wheat markets could hardly have been more different to last years, with production down by a third after the wettest autumn on record.
Wheat plantings fell to a 20-year low, resulting in a 12m tonne crop, well down on last seasons record 16.7m tonnes.
This left an exportable surplus of just over 1m tonnes, allowing prices to move up by 15/tonne from export levels to import parity.
Imports from Denmark and a record eastern European crop have capped UK feed wheat prices at about 75/tonne.
In spite of this, Brussels is concerned about rising inflation, and is trying to curb unwanted price rises.
It removed the 10 import duty on eastern European grain in November, and is refusing to grant export subsidies, which means the EU must export at world prices.
As a final resort, up to 3m tonnes of intervention rye can be released on to internal EU markets.
At current values, it might prove difficult to shift all of the 1m tonne UK surplus, so there could be some slackening of prices later on, as a 10/tonne drop from June to September 2002 will dissuade any carrying over of stocks.
Looking further ahead, the surplus from harvest 2002 is expected to be up to five times bigger, after good conditions encouraged farmers to drill more winter wheat.
Pundits are pencilling in a 17m-19m tonne crop.
This has been largely factored in, and UK wheat is already trading below US and French soft wheat markets, at 67/tonne for November.
But although more of the surplus than usual will need to be exported outside the EU, price rises are a possibility if UK quality is good.
Feed barley has traded 8/tonne below feed wheat for most of the year, and this discount is unlikely to widen.
Feed compounders are switching from wheat to barley, and farmers have also drilled potentially the smallest UK barley crop in 40 years this autumn.
The winter malting crop is already in tight supply and, at 76-80/tonne ex-farm, is only slightly cheaper than spring barley, which saw a near-50% jump in production this year.
But quality is variable, and exports of the 300,000 tonne surplus are off to a slow start.
Milling wheat is also of variable quality, with only 53% meeting a reduced breadmaking specification, according to the Home-Grown Cereals Authority.
But millers can use a wide range of wheat, and premiums are available for most specifications.
Supply could get tight later in the season, but a large UK and EU crop is expected next harvest, and if quality is good, premiums will come under some pressure.