Growers shun new-crop wheat market

By Robert Harris

NEW-CROP wheat sales are at a record low, with few growers prepared to lock into losses.

“In 25 years of grain trading, I have never known so little grain to be sold at a fixed price,” says Richard Whitlock of Banks Agriculture.

“But people do not queue up to make losses this early in the game. Feed grain for harvest movement is only worth in the high 50s/t. A lot of growers will make a loss if they do not achieve 70/t plus.”

Supply and demand suggest it may be the right time to sell, though growers should take an option on January or March futures to lock into possible price rises, he advises.

But currency and world values are the main factors influencing new-crop at the moment.

Although growing global consumption has helped prices, more importantly, the Euro has slipped by about 10% against the Dollar since February.

US soft red winter wheat, the world price benchmark, has risen sharply, to about $116/t for November, dragging EU values above intervention.

While that remains the case, growers can expect much more volatility, says Gerald Mason of the Home-Grown Cereals Authority.

For example, concern over US maize prospects could add a little support in the next couple of months.

“This may seem quite obscure to UK farmers, but it is a competing grain, and demonstrates the new factors that are coming into play.

“The long-term forecast is dry and hot. If realised, we could be in for quite a volatile time. This could feed through to UK prices, too.”

But the premium over intervention, created by the rising world price, could prove vulnerable. The November Paris futures (MATIF) value is Euro119/t, equating to 62-63/t ex-farm in the UK.

Improved US harvest prospects or a strengthening Euro could push prices back to the intervention level of Euro111/t, driving UK returns back below 60/t.

“In a worst-case scenario, current forward prices look good,” says Mr Mason.

Feed barley remains at a slight premium to wheat, worth about 60/t ex-farm at harvest and 63-64/t for November, says Stephen Maxwell of SCATS.

Growers unable to store all their grain at harvest should consider offloading the surplus now, rather than becoming forced sellers, he adds.

Further forward, as with wheat, currency, world demand and the willingness of Brussels to export grain freely without subsidy if the world price remains at current levels are the key factors, says Mr Maxwell.

“But if Brussels takes that route, it is likely to cap upward movement, since the EU intervention value, plus a small premium, will be regarded as the maximum world price.”

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