Intervention change may pull down barley prices
Intervention change may pull down barley prices
By Robert Harris
BARLEY prices could be hit by tighter intervention standards which Brussels intends to introduce in the coming marketing year.
While much attention has been focused on wheat, which is subject to several changes, (Business, Mar 3), little has been given to barley, says James Marshall, grain trader with merchant and shipper Soufflet.
The only change for barley is a cut in moisture content to 14% from the current 15%, although there is a k1/t (61p) allowance to 14.5%. "On the face of it, it does not look much," says Mr Marshall.
But he believes the change will make deliveries harder and more costly for growers. "How many farmers with barley at 14.2% will now risk intervention? The costs of rejection are so high."
Most growers consider intervention when the open market ex-farm price falls to £5-£6/t below the delivered intervention price. But, given the added risk under the new proposals, the market floor may well fall a further £2/t or more.
Assuming no change on the currency markets, that would value intervention grain for November at about £60/t ex-farm, says Mr Marshall. But the free market price is £3-£5/t better than that at the moment, he adds.
Wheat may be hit indirectly, depending on how French prices react. "The original proposal to increase the zeleny score to 25 would have excluded 30%, or 12m tonnes, of French wheat from intervention. What amount will now be excluded is not known, but any increase in non-interventionable wheat can only be bad news for the UK grower."
The current position highlights this. Soufflets wheat balance sheet suggests a tight end to the season in the UK. Although its surplus for the marketing year is almost 300,000t more than the ministrys official estimate, Soufflet reckons about 2.6m tonnes could be exported to the EU and 620,000t to other destinations by the end of June.
That leaves just 173,000t to sell between now and then, says colleague Mike Stubbs. "But the EU surplus is sitting heavily on the market, which is why prices are not expected to rise for the rest of the season."
He reckons that stockpile will hit 10.7m tonnes this year, 40% of it in France alone. "Next year, we know that EU wheat plantings are up by 10-11%, making the balance sheet look even heavier."
If the world price remains strong – it has risen $11/t in the past few months, and is now the equivalent of about £68/t delivered for new crop – there should be no problem selling the wheat, since little or no export subsidy from Brussels will be needed, says Mr Stubbs. *