Prices the cereal killer – FWi REVIEW OF 1997

FACE=HELVETICA,ARIAL SIZE=”-1″>December, 1997

Compiled by FWi staff

WHEAT prices failed to find inspiration
this year and remained low throughout the season. The harvest was good
in terms of yield, but variable to poor in terms of quality. A drop of
£20/ t during 1997 caused some commentators to speculate that
area aid payments were the only life-jacket keeping many farm businesses
afloat.

JANUARY

• Feed wheat slips back
  to £90/ t ex-farm in January as a strengthening of Sterling
  knocks the UKs export competitiveness. The Pound starts the year worth
  DM2.65.

• Milling wheat premiums are £20 over feed crops.
  But values are likely to come under pressure if mills start searching
  for alternative supplies, say traders.

FEBRUARY

• Seed certification
  figures released in February confirm a big rise in winter plantings of
  new malting barley and wheat. Wheat plantings are up 3% on previous
  season at 256,000 t and point to another possible record harvest
  this year. Figures from the EU merchants body COCERAL suggest the
  harvest could be even bigger. The UK wheat area has actually increased
  by 7.6%, it claims.

MARCH

• Election fever sends Sterling tumbling and prompts a rise in
  cereal prices. At DM2.67, the Pound is 4% weaker than a fortnight ago
  and export competitiveness is improved.

• A strong regional
  market emerges, with prices in East Anglia setting the pace. Feed wheat
  ex-farm prices for June reach £100/ t – £10 higher than
  their February low point. But traders warn the market could run out of
  steam if overseas buyers hold off and wait for the new crop.

APRIL

• The EU commission
  imposes an £11/ t tax on Third Country exports because it
  fears an exodus of grain out of the EU as world prices climb. The move
  effectively closes off the world market and domestic prices fall.
  Old-crop feed wheat is quoted at £91/ t. Traders condemn the
  tax as interfering with the free market.

MAY

• The already-beleaguered
  grain market is under further pressure, with about a million tonnes of
  wheat due to be shipped in the last quarter of the season. The outlook
  is not encouraging, according to Gary Hutchings of Dalgety. Old-crop
  wheat drops £2 to £88/ t.

JUNE

• By the first week of
  June, old-crop wheat is worth £80/ t – the lowest level for 20
  years. The chances of the market recovering before harvest are “between
  nil and zero,” says Robert Kerr of Glencore Grain.

JULY

• A shortage of new-crop
  supplies boosts wheat prices by £2 to £73/ t for August
  delivery, with another £2 premium for “off the combine” sales.
  Early samples suggest that concerns over crop quality may be
  ill-founded.

• Milling wheat premiums push out to £22 for
  Class 1 varieties over feed. Until now millers have taken little cover
  on new-crop, preferring to watch feed prices tumble.

AUGUST

• Wheat prices pick up
  – despite efforts by Brussels to keep a lid on prices by re-introducing
  its notorious export tax. World markets have climbed because of fears
  over bad weather, according to traders. August wheat is now worth
  £77/ t.

• Grain markets shrug off recent Green Pound
  revaluations and prices edge higher, despite the drop in intervention.
  Feed wheat is quoted at a 12-week high of £82/ t ex-farm for
  September – considerably better than the £72/ t it was worth
  at the end of July.

SEPTEMBER

• Grain exporters
  will have about a million tonnes less wheat to shift this year,
  following a significant drop in the UK surplus, say analysts. But
  merchants say shifting the smaller amount could be difficult due to the
  poor quality of the crop and the strong Pound.

• The average
  arable farmer in East Anglia has lost money on every tonne of grain
  produced this year, according to Michael Murphy of Cambridge University.
  If area aid payments are phased out or down, many farmers will go bust,
  he says.

OCTOBER

• THE feed wheat
  market bears the brunt of a rising Pound which causes prices to fall
  below £80/ t for the first time since August. Farmers bolt
  their barn doors in response and many refuse to sell. Trade is quiet.

NOVEMBER

• CEREAL farmers
  brace themselves for massively reduced incomes this year as feed wheat
  prices continue to tumble.

• The spot price for feed wheat falls
  to £76/ t ex-farm. Poor-quality samples fetch well under
  £70/ t. When this years poor yields are added into the
  equation, the only profit many farmers will see on their crops this year
  will be courtesy of their IACS cheque, say consultants.

DECEMBER

• Much of this years
  high-yielding low-quality crop has yet to be sold – compounding fears of
  an oversupplied domestic market. Export demand for UK feed wheat has
  also remained at rock-bottom levels all season.

• Economic
  turmoil in Japan and South Korea hits UK cereal farmers hard in the
  pocket. As investors rush to move capital out of Asia and into more
  stable markets, Sterling strengthens once again – prompting UK feed
  wheat prices to fall to £74/ t.