Specific weights pose grain market challenge

Low specific weights are the main quality challenge in marketing this year’s wheat crop, while a yield drop of 10 to 20% will put some growers dangerously close to being oversold.

“It’s a mess, but it’s not all bad,” said Gleadell managing director David Sheppard

“The market will adapt and absorb – it’s just that it needs to take account of the scale of it.”

Hagberg and protein levels were not so much of an issue and DON levels were relatively low, he said.

“Quality is generally getting better and almost all wheat will be usable in some form.”

However, with about two-thirds of wheat still to be cut, it was a tricky time for the trade and its customers, who were assessing quality so far and what they could use, said Mr Sheppard.

Grain quality penalties

Fallbacks or charges for failing to meet contract quality on specific weight range from £1 to £2/kg/hl, with buyers of full-spec milling wheats taking grain in down to 72kg/hl and in some cases 70kg/hl.

Feed wheat buyers with a contract spec of 72kg/hl are charging in a similar range, but down to about 68kg/hl. Below this level, charges may be £2.50/kg/hl.

With yields well down, he warned some growers might have thought they were some 30% to 40% sold, but in reality might be 60 to 70% sold. Several farmers who feared they were oversold had approached Gleadell to cash settle to avoid defaulting on their commitment.

Milling wheat exports from the UK would be unlikely this year, while imports would rise, said Mr Sheppard. “Six weeks ago we were expecting an exportable surplus of 2.5m-3m tonnes – a fair whack of that has gone.”

The key advice from grain buyers to growers is to have grain sampled and tested, know what they have in store, manage it carefully and keep in touch with buyers about progress. Knowing their contract obligations was also key, said Mr Sheppard.

At Nidera, trader David Eudall also said there had been a steady improvement in quality compared with early samples.

“The key is clarity of information. Farmers need to discuss with traders what they have and what the best homes are.” Starch producers may have less flexibility on taking wheat at specific weights as low as some other feed wheat customers might accept, he said.

However, the lower yields and poorer quality will have a big effect on farm incomes. “Unbelievable though it might seem, we could be talking about farmers losing money on wheat this year,” said NFU combinable crops adviser Guy Gagen.

Wheat market drivers

New contract highs have been a regular feature of futures markets during recent days, as several factors apart from UK harvest issues combine to push prices higher. The London November 2012 futures contract was at £208.50/t as Farmers Weekly went to press on Wednesday, while ex-farm feed wheat prices ranged from £190-198/t.

Market factors

  • Poor UK wheat yields (down by 10 to 20% on average) and quality
  • Continued concerns over the US corn and soya bean crops
  • Speculation on Russian harvest size, with yields 27.5% down on average across all grains
  • Possible Russian export restrictions
  • Higher yields than 2011 in France, but a higher proportion of the crop classified as feed.
  • Germany – some concern over low protein levels, but generally satisfactory quality
  • Fears for Western Australia’s wheat harvest if no rain soon

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