Competitiveness key to grain after Euro launch

By FWi staff

GRAIN producers could face a tricky start to 1999 unless UK grain prices remain competitive after the launch of the Euro on 1 January.

Although UK growers benefited from a good start to the export season, it remains to be seen how farmers will fare over the coming months.

By the middle of December, 1.6 million tonnes of wheat had left UK shores.. But at least as much remains to be shipped, and much will depend on overseas export demand and the value of the Pound against the new European currency.

The £10/tonne increase in the world wheat price, which helped support the market over the autumn, is now under pressure.

There is also a questionmark over import demand from South-East Asian countries, where harvests are now well advanced.

But with bulging intervention stores and memories of last years missed opportunities, Brussels is likely to continue its active export policy this season.

This could mean subsidising wheat shipments by £20/t or more – sometimes double that for barley.

At the peak of its activity this season, the Commission was spending £30m a week on export subsidies.

That helped EU wheat and flour exports top 8m tonnes, slightly ahead of last year.

But barley was the main beneficiary, with 7.4m tonnes of grain and malt leaving the EU, more than twice the amount shipped by this time last year.

Sterling will also affect the UKs export position.

The UK can expect a bumpy ride in the early days of the Euro, and just how long it will take Sterling to weaken remains an open question.

Analysts suggest growers should not count on it making a significant difference this year.

While no one should expect a dramatic upturn in the months to come, the opposite is also true.

Provided farmers are willing to trade wheat at the mid-£70s, exports of suitable varieties should resume once interest picks up in the new year. Out-and-out feed wheat is likely to tread water.

Barley, which has traded at a slight premium to wheat for much of the season, might find a little more headroom yet with intervention remaining an effective backstop.