Wheat prices plummet as French undercut

Tuesday, 09 February, 1999

By FWi staff

WHEAT prices in some parts of the country have slipped below £70/t for the first time since harvest as plentiful French supplies continue to undercut UK values.

Domestic demand is weak and export values show little change over the next few months because of a depressed market.

“Its a bit bearish,” said Ian Pinner of Banks Agriculture.

“We need somewhere in the region of 430,000t of export licenses a week to the end of June to deal with the EU surplus.”

Brussels has resorted to a more aggressive stance by granting export subsidies worth £23/t for 225,000t of open market wheat last week.

More than 5.5m tonnes of wheat export licenses have now been granted since the beginning of the marketing year.

Gerald Mason, of the Home-Grown Cereals Authority, said: “To create new demand, EU wheat has to price itself into a feed ration somewhere.”

For EU supplies to compete, the commission would have to increase export subsidies by the equivalent of £5/t, he reckons.

The domestic market is little better, with many consumers already having bought more than enough to meet their needs.

As a result there is only 90p/t difference in the value of March and May futures.

In such a flat market, growers looking to sell soon should put the money in the bank, claim traders.

Group 2 wheats like Rialto could make £2-3/t more in intervention than on the open market, they add.

Some growers may prefer to wait and see what effect the cold, wet weather has on European harvest prospects.

But any short-term rally created by local demand or currency movements should be considered as a selling opportunity, according to Cargill.

However, Sterling shows little sign of weakening, says Michael Craner of Harlow Agricultural Merchants.

“Last weeks 0.5% drop in interest rates should have knocked the Pound, but it bounced right back again.”