Unsettled harvest helps keep wheat trade stable

- 03 October 2006

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Farmers face a volatile wheat market over the coming months following a variable European harvest and a small UK exportable surplus.

UK growers cut about 14.7m tonnes this summer, about 187,000t less than last year, Grainfarmers’ Simon Ingle said.

That figure is based on an average yield of 7.95t/ha (3.2t/acre), and a crop area of about 1.85m hectares (4.6m acres). Adding on likely imports and stocks carried over from last season produces a total supply figure of 17.4m tonnes.

That would leave an exportable surplus of 1.7m tonnes, about 594,000t less than last year. However, recent DEFRA figures suggest English wheat sowings slipped to 1.7m hectares last autumn. That would leave an exportable surplus of just 1.2m tonnes, Mr Ingle said.

Speaking at a press conference in Stansted, Essex, last week, Mr Ingle expected the UK to export 340,000-400,000t of wheat by the end of September.

With poor quality issues across Europe, new market opportunities had been created, he added. “We are competitive and seeing buyers we haven’t seen before. We expect them to be back for more, and that is supportive for the milling premium.

There has been rapid escalation in prices. However, we have seen a £4 fall and a £4 rally in the last two weeks, and this volatility is set to continue.”

Global wheat supplies had fallen to their lowest level in 25 years, Mr Ingle said. And hot weather during the summer had reduced EU production to below 110m tonnes.

In the UK, yields suffered because of the late harvest and quality had been “very variable”, Mr Ingle said. An estimated 50% of Group 1 wheats would not be suitable for milling unless specifications were changed. Group 3 and 4 wheats had also been mixed.

Turning to this autumn’s drilling, Mr Ingle said figures showed farmers were planting more wheat, particularly Group 4 varieties, which were proving popular. This was largely driven by disenchantment with Group 1 and 2 premiums.

“National figures indicate little more than half of the crops planted are groups 1, 2 or 3, which could cause some issues with supply.”

David Sheppard, managing director of Gleadell, also predicted a UK wheat crop of 14.7m tonnes, producing an exportable surplus of 1.8m tonnes.

“Our exportable surplus is very achievable. We already have ready buyers in Spain, Ireland and Argentina, and could see the market move closer to import parity, which should be bullish to prices.”

Mr Sheppard said low world stocks meant another crop problem “couldn’t be afforded”. Nevertheless, Mr Sheppard said farmers should consider forward-selling some of next season’s crops. “I would say we are going to see dramatic price movements,” he added.

“If farmers sell 10-15% of their wheat now it at least gives them some certainty.”