Nervous recovery for wheat prices

By Tamarind Davidson

FEED wheat has recovered some of last weeks losses, but the market remains nervous as foot-and-mouth spreads, hampering exports.

Values fell nearly 3/t last week. Although half that has been clawed back, such volatility reflects the feeling in the trade, says Glencores James Maw.

“Even before the foot-and-mouth outbreak the UK was looking at some extra grain being carried into next season, but now it is likely that there will be at least a further 0.5m tonnes,” says Mr Maw.

“The worry is how we deal with this surplus.”

Although no countries have banned imports of UK grain, the problem remains that no-one wants to buy it.

“More and more doors are being closed. Buyers are very wary – if they can get it elsewhere at a similar price they will,” says Richard Whitlock of Banks Cargill.

However Mr Maw reckons the main reason exports are slowing is because UK prices are uncompetitive.

“Foot-and-mouth is not helping the situation, but there is an over-supply of old-crop in Europe, and wheat on the Continent, particularly France, is cheaper.”

Wheat for May is worth 68/t ex-farm, and for July 70/t.

New-crop values, after dipping slightly in response to the potential 1mt carry-over of wheat from this season to the next, are being supported by recent MAFF estimates of a 35% drop in the area of planted winter wheat.

November wheat is 70-72/t.

The wettest autumn on record is mainly to blame, although the final shortfall is likely to be nearer 20%, says Mr Maw. Barley area was also down by 24% compared with last year.

EU grain production is set for a 3% decline next harvest to 205.8m tonnes, according to latest estimates from merchants body COCERAL, in Brussels.

Figures suggest that wheat area will decline by 6.6%, and a 7.1% drop in the total output is expected, producing a harvest of 88.7m tonnes.

In contrast, spring barley area is expected to increase by 7.8%.

A drop in EU production means that there wont be as big an exportable surplus out of Europe next season, but this is unlikely to impact on prices, believes Mr Maw.

“France is having similar problems to the UK and may have to carry crop to next season, so there will be no shortfall, just regional differences and more trading opportunities.”

But Mr Whitlock reckons that prospects are far from promising and it is “a nightmare situation”.

“Forecasts of a reduced UK and EU planted area help support prices to an extent, but it always comes down to supply and demand. If there is still more grain of certain qualities than is needed, values will not be supported.”