Wheat trade holds firm as EU export tax is confirmed
By Philip Clarke
WHEAT markets have continued to hold firm, despite confirmation that Brussels is to collect an export tax on grain sold outside the EU.
As farmers weekly went to Press on Wednesday (Oct 25) feed wheat was trading at about £119/t ex-farm for November – £4 up on the same time last week, though slightly back on Mondays peak as sterling recovered.
But everything still points to a strong market for the rest of the season. Figures from the US Department of Agriculture estimate a 6% fall in US wheat production, after a third successive year of bad weather.
This combined with the reappearance of a number of big world buyers last week, including Egypt, Tunisia and China, to push world prices to new seasonal highs.
Closer to home, continued lack of ex-farm supplies is keeping the UK market tight.
Against this background, the EC confirmed late last week that it was going to introduce a grain export tax from Nov 16, in a last-ditch attempt to rein in prices.
With world prices overtaking EU levels (midweek, US wheat was worth about $7/t more than UK supplies delivered to north African markets), exporters will have to pay back some or all of the extra.
But rather than impose a flat-rate tax – politically unacceptable to the French – the EC is making traders tender a level at which they wish to do business.
Trade reaction to what effect this will have on the market has been mixed, though much will depend on what rate of tax the commission accepts before it grants export licences.
Tim Pollock of north east co-op Tynegrain anticipates the EC will take a firm line, only accepting the most generous tenders as it tries to limit export tonnage and depress prices.
This view is shared by Robert Kerr of shipper merchant, Glencore. "This is the commissions last weapon," he says. "If the world market keeps going up, the tax offers will have to increase in tandem, putting a ceiling on internal prices."
But other merchants believe factors other than the world market will continue to drive the UK trade. Nick Oakhill of Usbornes points to the lack of cover taken by domestic compounders post-Christmas and the fact the Spanish will still be in the market in the new year.