Think autumn wheat, not barley, says HGCA

14 August 1998

Think autumn wheat, not barley, says HGCA

CEREAL growers considering what to plant this autumn should be thinking wheat rather than barley, according to analysis by the Home Grown Cereals Authority of market prospects for 1999.

Stressing that their views are, at best, "tentative", the HGCA economists suggest farmers should be budgeting on a £10/t rise in feed wheat prices in 12 months time, but no increase in barley values.

In general terms, the long-term global outlook is for tightening grain supplies and growing demand.

US farmers are expected to cut plantings this autumn in response to poor prices, while EU growers will be taking another 5% out due to higher set-aside.

"Growth in consumption is expected to exceed production for the first time in three years," says the HGCA. "As such, the EU market is likely to be driven by export subsidies rather than intervention. As world stocks decline, there will not be the imperative for the EU to use intervention to hold grain off the market."

This is likely to be to the benefit of UK wheat growers. "In an intervention market, UK wheat is at a disadvantage because it generally does not meet intervention standards," says the HGCA. As such, it has to trade at a discount to Continental grain in order to find a buyer.

"But in an export rebate driven market it is at less of a disadvantage. Most UK wheat is produced within 100 miles of tidal water and has low freight costs to outside markets," it argues.

As world wheat prices rise after harvest 1999, the pressure on the Brussels export rebate programme will ease, increasing the potential for EU prices to rise above intervention levels again.

But the outlook for coarse grains is for more of the same. EU intervention stocks of maize and barley already stand at 11m tonnes compared with 2m tonnes of wheat and are expected to grow again this season.

Any improvement in world markets in 1999/2000 is likely to be met by the commission releasing stocks rather than funding export subsidies. "Do not budget for any increase in barley prices," is the HGCAs advice. &#42

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