Export prospects weak so UKwheat prices slip

12 February 1999

Export prospects weak so UKwheat prices slip

WHEAT prices slipped below £70/t for the first time since harvest in some parts of the country this week as plentiful French supplies continued to undercut UK values. Domestic demand is also weak.

Export values show little change over the next few months – there is little carry in the market. "We have been bid the same price for February as May," says Ian Pinner of Banks Agriculture. "You might make 50p more for June." This gives buyers no incentive to cover forward positions.

"Its a bit bearish. We need somewhere in the region of 430,000t of export licences a week to the end of June to deal with the EU surplus." Even then, UK wheat could struggle to find a buyer, he adds. "The French are hammering wheat into intervention where it suits, which leaves feeding type wheats which compete with the UK."

At least Brussels is continuing its more aggressive stance by granting export subsidies worth k33.48/t (£23/t) for 225,000t of open market wheat last week. More than 5.5m tonnes of wheat export licences have now be granted since the beginning of the marketing year.

But homes remain scarce. Korea was one market which the EU had hoped to fill. However, Poland sold 400,000t of wheat recently at just $80/t (£48/t) on board ship, which, after freight charges, comes to about $100/t delivered.

"To create new demand, EU wheat has to price itself into a feed ration somewhere. But this means the Koreans could be buying wheat at around a $10/t discount to maize," says Gerald Mason of the HGCA.

For EU supplies to compete, the commission would have to increase export subsidies by $8/t (£5/t), he reckons.

The UK domestic market fares little better, with consumers having bought more than enough to meet their needs. As a result there is only 90p/t difference in the value of March and May futures.

In such a flat market, growers looking to sell soon should put the money in the bank, says traders. Group 2 wheats like Rialto could make £2-3/t more in intervention than on the open market, they add.

Some growers may prefer to wait and see what effect the cold, wet weather has on European harvest prospects. But any short-term rally created by local demand or currency movements should be considered as a selling opportunity, says Cargill.

However, sterling shows little sign of weakening, says Michael Craner of Harlow Agricultural Merchants. "Last weeks 0.5% drop in interest rates should have knocked the £, but it bounced right back again." &#42

See more