By Robert Harris
UK wheat prices have held on to recent gains despite a sharp rise in the value of the Pound this week, which saw it reach its highest point against the Euro to date.
On Wednesday,1 was worth just 63.3p. But the grain market soaked the news up, thanks to support from improved export business.
Many major importers bought or took options on EU stocks last week.
Iran bought 300,000t of French wheat, and could buy as much again. Algeria, Tunisia and Morocco are all doing business too, says Gerald Mason of the Home-Grown Cereals Authority.
As a result, Brussels granted 550,000t of free market export licenses last week, at a subsidy of $39.29/t (£25/t).
This made French wheat more competitive on the world market, pricing it at about $93/t, a $4/t discount to US soft red winter wheat.
That, together with a forecasted 1m tonne reduction in French end-of-season stocks by ONIC, the French intervention agency, saw French wheat futures rise about 1/t (63p/t), the first time they have moved for a month, says Mr Mason.
That added support to UK values, as has a stronger market.
A delay to maize imports into Spain and Portugal has prolonged demand for UK feed wheat, and consumers remain short, says Mr Mason.
Non-EU countries, notably Cuba and South Korea, have also taken a substantial tonnage of UK grain, which is competitive with US maize, says Dalgetys Gary Hutchings.
The most recent sale to South Korea, of 35,000t, was worth $85/t (£53/t) on board.
Add on the export refund, and that works out at about £67/t ex-farm.
But, with shippers looking to top up boats in the next few weeks, ex-farm prices of £70/t near ports are likely, he adds.
Such activity could put a reasonable base in the New Year market too, he maintains.
“We could see 1.8m tonnes of wheat leaving the UK by the end of December.
“That goes quite a long way to moving the exportable balance. Provided the Pound behaves, there is no reason why we cant continue to sell post-Christmas.”