Quality wheat premiums rise as feed is squeezed
By Robert Harris
PREMIUMS for good quality wheat are growing as recent catchy weather puts feed wheat values under pressure.
Soft milling wheats like Claire, typically 74kg/hl, 220 Hagberg and 10.5% protein, which suit many export markets, are worth about £4/t more than feed wheat, says Glencore Grains Robert Kerr. And Group 1 milling wheats (76/250/13%) are heading towards £20/t over feed.
Futures values, which reflect feed wheat market expectations, fell sharply last week as more rain delayed harvest, with November futures down £3.90 to £58.85/t. They remained close to contract lows earlier this week.
Limited selling by growers helped limit the damage, with feed prices slipping by about £2/t to average £53/t near a port, £50/t inland and about £55/t in Scotland for September.
"The concern is that our wheat surplus is only of feed quality," says Mr Kerr. "It reflects the massive divide that is opening up between quality wheat and feed wheat."
Although the end of harvest in the main wheat growing areas is in sight, with about 20% to cut midweek, no clear picture of UK wheat quality has emerged, though there is likely to be a fair tonnage of feed wheat to shift.
The south has fared best. James Marshall of Soufflet Agriculture says wheat quality in the region appears to have held up well, though specific weights are variable, typically 72-77kg/hl for soft wheats and 70-78kg/hl for Malacca.
"We are relatively optimistic that in the central south we will be able to export a good proportion of the crop." But blending, and finding homes for some lower specification grain, are likely to feature through the season, he adds.
Hagberg levels have suffered more in eastern crops. David Sheppard of Gleadell Agriculture says: "The UK will have a sizeable lump of feed wheat, with every region affected to some degree. A lot of East Anglia and Lincolnshire has some pretty dodgy quality, and Yorkshire has some good and some not so good."
A trial run by Gleadell to load a boat with low-grade biscuit wheat at 150-160 Hagberg, 76kg/hl and 10.7% protein using feed wheat proved impossible, and parcels of the right specification had to be bought.
Feed wheat could face further price pressure, traders agree. "There is speculation that Russia has revised its crop estimate up by another 10m tonnes," says Mr Kerr. "But farmers here are too busy to sell so prices are not going to slip much in the short term."
Further forward, they look vulnerable. Big tonnages of "any-origin" wheat have traded into the near Continent at £58-60/t for November, says Mr Sheppard, the UK equivalent of less than £50/t ex-farm.
Unless exports take off soon, the price of feed wheat will have to fall if enough is to be shipped this season, says Mr Kerr.
But quality wheat producers like Australia, Canada and the US are revising their harvest estimates down. "Prices for quality wheats, including good soft wheats, are much more likely to stay on a constant, especially if we carry on exporting," says Mr Kerr.
However, Mr Marshall believes price pressure could filter through to soft milling grades, too. "We may be $30/t cheaper than US wheat, but no one is buying it. The Black Sea region has reported another sizeable quality wheat crop. It will compete in every market we go for." *