Forward selling could pay, says HGCA
By FW Staff
FORWARD selling of wheat could pay this year, even though price falls seen in recent seasons are unlikely to be repeated, says the Home-Grown Cereals Authority.
At present, a £1 a month carry is available. If ex-farm wheat in the eastern counties is put at £69/tonne in October, then June 1999 supplies will be worth £77/t, says the authoritys Gerald Mason.
Those prices are unlikely to change dramatically because of a bumper EU crop and a predicted worldwide tonnage of almost 600m tonnes.
The world wheat price would have to rise more than the cost of export rebates, currently Ecu30/t (£22/t), before it affected EU prices. “A smaller recovery will most probably be absorbed in the export refund programme,” says Mr Mason.
The main unknown is sterling. But, it would need to weaken by about 5% against European currencies to account for interest charges through to June alone, he reckons.
A farmer borrowing against the grain in store will typically pay 2% over base in interest charges, which will cost about 50p/t a month (see table).
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That means the price must rise by more than £4/t if selling in June is to pay better than an October sale. But there is no guarantee such a carry will exist, says Mr Mason.
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