By Robert Harris
OLD-CROP wheat values dropped to new contract lows for the second week running, despite a slight recovery in the Euro.
On Tuesday, May futures closed at 69.75/t, with July worth 71.30/t, putting further pressure on ex-farm values.
The reason is a slip in French wheat prices following last weeks decision by Brussels market managers to effectively ignore exports of free-market grain.
Once again, wheat and barley from intervention stores was favoured, with 230,000t released for shipment.
Free-market licences amounted to just 25,000t of wheat, with no subsidy, even though soft red winter wheat, the world price benchmark, is currently 20/t (12/t) cheaper.
The bidder may have taken advantage of the fact that this months awards can be used for new-crop, where EU and US values are now close enough to enable currency hedges to protect against losses.
Although changes to the licence system by Brussels have made that tactic less attractive, the message remains loud and clear, says Dalgetys Trevor Harriman.
“There was nothing to stop Brussels granting export licences at subsidies ranging from 17-19/t. But it chose not to.
It has made it clear that intervention stocks can be exported more cheaply. This has effectively scuppered the market.
“The UK could have a bit of a rebound – it is only May. But that is unlikely, and we would have to recover from a lower base.”
April UK export figures are lower than expected, at 200,000t.
Mr Harriman predicts about 300,000t will be shipped in May and June. “Even using ministry figures that leaves a surplus.”
But the HGCAs Gerald Mason believes Brussels decision to change the licence system shows it remains keen to accept bids for old crop.
However, the effect may be limited, as the UK market appears to be increasingly focused on end-of-season supply and demand, he adds.
“It is difficult to know where prices will end up. No one is quite sure what is left on farm to sell.”
With support prices due to fall by 7.5% in July, he reckons once combines start rolling, compounders will switch to barley if old crop wheat remains about 70/t.
European grain traders body COCERAL released EU grain crop estimates for the coming harvest this week.
It predicts just over 206m tonnes will be cut, of which 97m tonnes is wheat, up 8% on the year.
However, the trade appears to have factored this in, with the increase mainly reflecting last years weather-induced fall.
EU new crop wheat remains supported by the Chicago futures price and the weak Euro, says Mr Mason.