Unexpected ally for UK wheat growers

By FWi staff

TALK of a massive UK wheat crop leading to a huge exportable surplus was widespread at Cereals 2000.

Given the right weather from now through harvest, 17-18 million tonnes could be cut this year.

That would leave the UK having to export 4-5m tonnes of wheat next season to balance the books.

With a big EU harvest also predicted, good quality will be vital to help shore up prices.

However, farmers may receive support from an unexpected ally the world price, said Francis Mordaunt, of farm business consultant Andersons, at the event.

The world price is based on the US price for soft red winter wheat on board ship in the Gulf of Mexico.

Depending on destination, the UK ex-farm feed wheat value usually matches it, he said.

It has been worth about $90-100/t over the past 12 months, equating to a UK ex-farm value of 60-66/t, well above the intervention-based harvest level in the high 50s/t currently being quoted.

Recent gains in the market, coupled with the sliding value of the Pound against the Dollar, have helped further.

Wheat in the Gulf is now worth about $107/t for September 2000, or 71/t ex-farm.

That is way higher than any figure being offered, and represents a premium of about 10/t.

But the USA tends to factor a big safety margin into the market, so futures prices usually fall in the summer months.

Some slippage has already happened, with recent rains in the USA, boosting maize prospects, and coarse grain stocks are high.

It could be that prices weaken further, and/or Sterling strengthens. The market seems to think that will be the case, said Mr Mordaunt.

However, when intervention falls again in 2001, ex-farm wheat will be worth about 53/t, he added.

That, and continued recovery in world markets, will almost certainly mean that the world price will replace intervention as the main market driver by then.