HGCA predicts a record wheat harvest in 2002

25 January 2002




HGCA predicts a record wheat harvest in 2002

By Olivia Cooper

WHEAT growers are heading for a record harvest in 2002, according to first estimates from the Home-Grown Cereals Authority.

But, while harvest movement prices may come under pressure, values in later slots could still improve, say traders.

The HGCA released the figures on Tuesday, based on a survey of merchants forecasts.

UK wheat area is pegged at just over 2m hectares (4.9m acres), in a range between 2.05m hectares (5.06m acres) and 2.15m hectares (5.3m acres). This is 25% above last year, and with a trend yield of 8.3t/ha, could produce 17.2m tonnes, at the lower end of recent trade speculation.

Winter barley plantings are on average 7% lower, at 0.43m hectares (1.06m acres).

The first estimate of winter wheat plantings in the US was also released recently, and looks positive for prices. This suggests the area is expected to fall for the sixth year in succession, to the lowest since 1971. Crop condition is poor, and soft and hard red winter wheat stocks are also forecast to fall, by 53% and 22%, respectively.

"This greatly reduces any cushion for reduced output next season and means weather will be even more critical to price direction in the coming months," says the HGCA.

But the International Grains Council predicts a bigger world wheat crop, with EU production alone estimated to be about 11m tonnes up on last year.

Given the big UK surplus, which could reach 6m tonnes, new crop prices are struggling to reach the farmers target of £70/t pre-Christmas – resting at £67-£68/t for November. But this is a significant discount to most other origins, and is nearly at parity with US corn prices. Prices could lift considerably if quality is good.

But Andrew Bury of Soufflet Agriculture says farmers should consider selling some wheat forward, particularly if they need harvest movement.

"The logistics of moving the surplus from a 17m tonne crop at harvest are a nightmare. There is not much of a harvest discount at the moment, with wheat trading at £62-£63/t, but this is likely to widen as the season progresses.

"UK wheat is cheap against the French market on new crop, so there is potential for improvement. But the world market could ease back, so buying an option would seem a good form of insurance."

Meanwhile, DEFRA has lowered its estimate of the 2001 wheat harvest by 400,000 tonnes, to just 11.57m tonnes, leaving a small export surplus of about 600,000 tonnes.

Although the markets scarcely reacted, exports to Spain and Italy have picked up. This has left just 300,000 tonnes to sell between now and June, giving the market a more positive feel.

Glencore Grains wheat trader, James Maw, reckons prices could improve. "With supply and demand so finely balanced there is always the potential for a £4-£5/t rally later in the season if supply gets tight, although that will continue to be capped by import levels." &#42


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