2 February 1996

World wheat signs

WHEAT markets are becoming increasingly volatile as competition among the major players hots up.

The producer of the future will be faced with a market where "price promise" affects planting decisions rather than price expectation, NFU economist Tony Donaldson told a grower meeting at Sparsholt College, Hants.

"Recently, the price signal has not worked, and the area grown has failed to keep pace with demand."

Set-aside within the EU, which could respond neither quickly nor flexibly to market signals, was one factor, he said.

The decline in planting in Russia was also highlighted. "Last year, the Russians had their worst harvest since 1963; they do not look like becoming an exporter for the foreseeable future."

Such factors had contributed to recent volatility and taken prices of US milling wheat to $200/t.

But expansion of the area grown worldwide would limit further price increases.

Richard Barnes, minister counsellor for agricultural affairs at the US Embassy agreed, saying the US had enormous reserves which it could tap into. "We have 34m acres currently in the conservation reserve programme, which is equivalent to the total area of wheat grown in the EU."

Of the 14.4m acres eligible to come out of the programme this year, however, probably under 1.5m acres would do so, he said.

One in three harvested acres in the US is already exported, and this will doubtless increase once the US Farm Bill is concluded.