By FWi staff
WHEAT returns could be as much as 10/t higher next season if current bull factors affecting the market come to fruition.
November 2001 futures prices are already 5/t higher than those for November 2000, says Richard Whitlock of Banks Agriculture, suggesting an end to the current downturn in the wheat cycle.
“Record low world wheat stocks are part of the reason,” he says.
“Currently they amount to about 10 days supply, the lowest they have been since 1995/96.”
Bolstered by “dustbowl conditions” in the main US growing regions this autumn, the premium for next years harvest should be maintained.
“This, combined with the fact that area aid will be going up about 15/ha under Agenda 2000, could lead to a 10/t increase in returns next year,” he says.
However, the current UK wheat market remains weak, with delivered prices slipping to the mid 60s, 50p-1 lower on the week.
High domestic stocks and poor export demand are the main reasons. Most farmers face prices in the high 50s/t, says the Home-Grown Cereals Authority.
Looking further ahead, the Economist Intelligence Unit forecasts world wheat prices rocketing over the next two years.
It suggests US hard red winter wheat will be worth $170/t by 2002, compared with $130/t today.
Harvest problems and good demand mean global wheat stocks are set to fall to a 20-year low of 119m tonnes by the end of the 2000/01 season, though 51m tonnes held in major exporting countries will keep the lid on prices in the short term.
Soft red winter prices – the global price benchmark against which most EU wheat has to compete – could follow hard wheat, albeit at $10-20/t discount, says the HGCAs Gerald Mason.
That is potentially very good news for UK farmers. Last year, wheat needed a 30/t subsidy to compete against soft red winter wheat. Today it is at a $10/t (18/t) discount.
“Conceivably, if the world market rises much further, the UK market could follow,” says Mr Mason.
The main unknown is how new customers will value UK wheat against US supplies, he adds.
“Samples are being sent all over the world, but we wont know for a while where we can peg ourselves on price.”