By Robert Harris
WHEAT growers with good storage and few cash flow problems could be better off not selling their crop this year.
Indeed, as the strengthening Pound, a big crop and sluggish exports push the market down to new lows, with no one knowing where prices will go next, some are considering doing just that.
New MAFF supply and demand figures released this week confirm a large export availability, says Gerald Mason of the HGCA.
UK consumption is put at 12.95 million tonnes.
“Allowing for slightly reduced imports due to this years better quality, and some juggling of opening and closing stocks, it looks like the UK will have to export 4.6m tonnes, over 50% more than last season,” he says.
Delivered prices have slipped a further 1-2/t over the past week, taking ex-farm prices down to 55-58/t.
Not surprisingly, few farmers are selling, though the hope is that UK crop can compete on export markets at these levels.
“We are seeing some interest from Portugal, Spain and Holland, so we are not priced out of the market,” says Angela Gibson of Glencore Grain.
“But whether it is enough to clear the surplus is open to question. Everyone is finding it difficult; we are seeing a big, big resistance among farmers to sell.”
Feed coasters are about $2/t below French levels, and better quality UK wheat is $10-$12/t cheaper.
“We ought to be able to shift it at that price, but our wheat has not got the quality track record that others have.”
How foreign buyers view UK wheat is crucial.
“We will have to do quite a bit of Third Country business to ship the surplus,” says Dalgetys Trevor Harriman.
“To export as feed we could need a $10/t subsidy to compete with US maize.”
But the EU Commission is unlikely to pay out yet, he adds.
“The market wants milling wheat and the EU can export without subsidies.”
Hagbergs and specific weights are higher than last year in the UK, which could help overcome the subsidy barrier.
Foreign millers are still assessing quality, says Mr Harriman.
Any tonnage they can use would then compete against US soft red winter wheat, which is $12-$13/t more expensive.
Next season could be a different matter, says Richard Whitlock of Banks Agriculture.
“The hope is that this seasons awful prices are corrected in the next.”
Poor drilling conditions in Europe and the USA and a predicted downturn in Australian yields are supporting the market.
“There is an argument that world stocks could fall to critical levels,” says Mr Whitlock.
Nov 2001 futures are worth 66/t, or 63-64/t on-farm.
“Some consumers are already coming to the market, realising that they may be on the back foot for the first time in several years.”
He believes farmers, and some merchants, could carry over up to 1m extra tonnes of wheat to the next marketing year.
“This is a high risk strategy, but maybe prices could rise sufficiently to offset the costs of holding it.”
Such a move would reduce this seasons exportable surplus to a more manageable 3.6m tonnes, he adds.