Weak demand dents wheat potential

By FWi Staff

THE UK wheat market has had a disappointing start to the year with weak prices
and poor export prospects.

The market took an exceptionally long festive break this year, a sign that
activity could pick up as traders and farmers return to their phones, said a
spokesman from Banks Agriculture.

The reality has been very weak demand and a reluctance amongst farmers to sell
at prevailing prices, he said.

Milling and biscuit prices have fallen in line with feed levels, but group 1
milling wheats are still worth £20/t over feed prices.

It looks unlikely that the premium will fall much from these levels due to the
competitiveness of UK milling wheat, though with sufficient supplies still left
on farm an increase in premium also looks unlikely, said Ian Wallis of Cargill
Plc.

New crop grain prices have also fallen but have not come under the same pressure
as old crop, he said.

Milling wheat values are at £91.66/t this week while feed wheat is about
£74.73/t. The futures market has also suffered with January contracts down £1.70
to £75.90/t and March contracts falling £3.10 at £75.90/t.

UK traders continue to point to our competitiveness with French wheat as the key
to clearing the export availability this season, said a spokesman from the
Home-Grown Cereals Authority.

At present prices, exports are likely to be slow in the early part of this year,
he said.

Domestic wheat prices either need to fall, or Sterling needs to weaken in order
to make exports more competitive.

French intervention prices have dropped on the back of the launch of the Euro
stressing the need for UK prices to be competitive.