Sterling and quality threaten feed wheat

By FWi staff

THE UK feed wheat market has experienced further pressure this week as the strength of Sterling and prospect of poor quality crops dominates prices.

As the harvest progresses more sample results indicate that the average quality has been falling.

The recent surge in the value of Sterling which followed the Bank of Englands recent interest rate rise has meant that $7 has been wiped off the competitiveness of UK exports.

To add to the situation, domestic consumers are either covered, pre-covered or comfortable with their percentage of cover, said a spokesman from Glencore Grain.

On the back of these factors domestic feed wheat prices have dropped to about £67.70/t while futures values have slipped to £67.70/t and November to £71.45/t.

Traders warn that the bottom in the market has not yet been found. Last year, the market fell below todays levels, said a spokesman from Banks Agriculture.

“This year, we have a poorer quality crop, half-a-tonne per acre more yield, the European Commission is holding back on export refunds and a large, good quality EU crop to contend with.”

Latest UK yield expectations of 15.5 million tonnes would lead to an export target of between 3.5 million and 4 million tonnes, noted the Home-Grown Cereals Authority (HGCA).

This would require a continued monthly export programme of 350,000 tonnes to clear it, a tough task seeing the strength of the Pound.

Ian Wallis, of Cargill believes further rate increases could be on their way on the back of strong consumer spending and rising house prices.

“Speculation that the difference between UK and other European interest rates will widen further is predicted to keep supporting Sterling,” he said.

However, despite the weaker feed market milling wheat demand is strong. Milling wheat values have inched up over the week to about £91.10/t.