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Review of 1997 Cereals

- 23 December 1997
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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.



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