Strong Pound and export dearth hit wheat

By FWi staff

UK wheat prices have fallen this week as Sterling remains firm and export sales dried up.

Domestic wheat is currently uncompetitive on non-EU markets, noted the Home-Grown Cereals Authority. “However, wheat continues to enter Southern Europe, in particular Spain.”

To generate new exports, UK wheat must become competitive with the French market, said Ian Wallis of Cargill, and to do so the UK needs to sell at even lower prices, he warned.

“The lack of interest within the market has caused the price of wheat offered for export to drop by around 3/t, but even with these reductions sales remained stagnant. However, slow on-farm sales and steady demand from domestic consumers have meant that internal market prices have only fallen by 1/tonne.”

Breadmaking wheat fell back to 92.30/t this week, while other milling wheat is at 82.70/t. Feed wheat is now selling for about 76.30.

LIFFE futures have seen more activity this week with wheat futures trading 649 lots, 649,000 tonnes, yesterday (Tuesday). Most of the pressure was caused by weaker European cereal prices, noted the HGCA. “And UK values fell to maintain the discount to continental prices.”

Sterling had a volatile day and strengthened to a seven-week high at one stage during the day to stand at DM2.834. This put further pressure on prices and futures plummeted over 1 for the 1999 harvest.

Although Sterling may weaken over the long term, Mr Wallis advises farmers to consider taking at least partial coverage through forward sales of both old and new crop, to protect against short-term uncertainty.

“A large volume of grain may be offered to the market in the New Year because of slow release this year, and the result could be a further decrease in values,” he said.

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