Grain price hit by £
Grain price hit by £
PROSPECTS of better grain prices after MAFFs recent downward revision of the 1999 UK harvest have been dashed by the strengthening £.
New ministry figures put total cereal production at 22.1m tonnes. Wheat and barley have been marked down by 200,000t apiece, and output is now estimated at 14.9m and 6.5m tonnes, respectively.
Robert Kerr of Glencore Grain believes the exportable surplus will fall by 100,000t. But this is unlikely to help prices, he says.
"Less grain to export has to be better news, but currency is racing away to 15-year highs."
So, although UK grain values gained 50p/t after the news of the revisions, the strong £ pushed prices down by £1.50/t, taking the typical ex-farm feed wheat value down to £68/t on Tuesday.
Exports are on target at present, says Mr Kerr. But prices will have to drop in the short term for the UK to remain competitive. "I cant stress how important currency is. Demand will not come from pigs, or poultry or cattle, so it must come from exports."
Gerald Mason, senior economist at the Home-Grown Cereals Authority also believes the exportable wheat surplus will fall, perhaps by 200,000t. "This could help offset further damage caused by the strong £," he adds.
UK barley prices remain unchanged, he notes. Strong international demand last week, and rumours of further Saudi Arabian purchasing kept EU prices firm. Feed barley is now trading at a £2.50/t premium to wheat. *