Smaller wheat area should see prices rise

Wheat prices are likely to firm over the next couple of seasons as farmers cut back their crop area in response to CAP reform and rising input costs.


David Doyle, head of Grainfarmers wheat desk, reckoned this autumn’s drillings would fall by 5-10%.


“If it’s 5% we could end up with a crop figure of about 14m tonnes for next harvest,” he told a recent press conference at Stansted, Essex. “We are potentially looking at a fall in export availability to 1.5m tonnes for 2006/07.”


Mr Doyle said farmers could already lock into 70/t for Jan 2007.


But it could be worth waiting for DEFRA’s December census figures before committing. “If these confirm the tight supply and demand pattern, then we expect to see prices rise as early as next spring.”


A 10% drop would leave just over 680,000t available for shipment. That, and a shift to better quality, could be even better news.


“We are talking of a quantity where we could almost be going into the realms of niche marketing.” That could remove export values as a base price and allow the market to rise to import values.


A further 750,000t was likely to come off the market in 2007 as major feed grain user Cerestar had decided to switch to wheat from maize, Mr Doyle said.


The more immediate outlook was also supportive. Assuming an average yield of 8t/ha (3.2t/acre) and using DEFRA’s revised planted area, which show last autumn’s wheat sowings fell 6%, Mr Doyle reckoned combines had cut just under 15m tonnes of wheat this year.


The market had also carried over about 2m tonnes of old crop, and 900,000t was likely to be imported. But, with demand static at 13.5m tonnes, after allowing for closing stocks that left 2.5m tonnes available for export in 2005/06, about 200,000-300,000t less than the last campaign.

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