New-crop wheat premiums promising

By FWi staff

TIGHT grain supplies and recent dull weather could produce good premiums for early new-crop wheat this harvest.

Millers and compounders are already running short of old-crop, and some are paying season highs for grain, says Robert Kerr, of Glencore Grain.

In certain areas earlier this week, ex-farm milling wheat was worth 100/t, and feed wheat about 75/t, according to Home-Grown Cereals Authority figures.

Old-crop is going out very tight indeed, says Mr Kerr.

This will heighten demand for newly harvested grain. But early supplies are likely to be short, given the recent lack of sunshine.

Some traditionally early growers have said they are unlikely to start cutting before the beginning of August, a week later than normal.

And, if the unsettled weather continues, fears over lack of grain fill and associated quality problems will grow.

Traditionally, early Soissons has gone to feed homes. This year, millers are short, too, so there will be two homes competing for it, says Mr Kerr.

Longer-term, it is difficult to be bullish about feed wheat.

Recent HGCA figures suggest a 14% rise in British wheat area this season to 2.1 million hectares (5.2m acres) which, if confirmed, would be a record.

Using a 10-year yield trend, about 16.9m tonnes of wheat could be cut, 2m tonnes more than in 1999.

Even at the more conservative five-year trend of 7.77t/ha (3.14t/acre), 16.3m tonnes would still be harvested.

This would give a UK exportable surplus of almost 4.75m tonnes, 1.5m more than the 1999/2000 campaign, says Mike Adams of Banks Agriculture.

But EU export levels are likely to be determined by Brussels again next season, following the sharp fall in world prices this week.

New US planting figures for spring wheat and corn were much higher than expected. That, coupled with unexpectedly high stocks, pushed December 2000 prices down US$6/t to just under $100/t.

If those prices last, Brussels will have to grant export subsidies of about 14/t (8.80/t) for grain exported to countries outside the EU.

There could be better news in 2001. The latest forecast from the International Grains Council suggests consumption in 2000/01, at 596m tonnes, could outstrip production by 19m tonnes.

Stocks could fall to 103m tonnes, which, if sustained, could cause food security problems, says Mr Adams.

To meet demand next season and ensure stocks level out, wheat, rather than the more attractive soya or maize, must be planted in quantity in the Northern Hemisphere within the next four months, he says.

If this does not occur, we could see a substantial increase in wheat prices for the 2001 harvest.