March 20, 2009
Large UK wheat supplies holding back prices
A projected 15-percent decline in this year's UK wheat area has failed to boost grain markets as concerns linger over 2008's crop surplus.
DEFRA's December census showed that 1.7 million hectares of wheat had been sown by December 1, down 14.7 percent from 2007. Both old and new crop prices increased slightly then, but Frontier's Nick Burchell said gains were limited as markets had largely expected a fall.
The UK normally has a carryover of 1.8 million tonnes, but it could be 2.2 million tonnes this year due to 2008's bumper harvest and slowing exports.
November wheat futures prices was GBP124.50 per tonne, while May's was GBP111 per tonne, reflecting the scale of the uncertainty, Burchell said.
The latest USDA has increased the 2008-09 world wheat crop to 584.4 million tonnes with end-stocks increasing to 155.9 million tonnes due to lower world demand, adding to the potential downward price pressure.
However, analysts speculate that if the large global carry-over and lower sowing in major areas coincides with poor yields, the market could improve tremendously.
While supply and demand would remain relatively tight, price prospects will still be bearish if there are no weather events such as floods or droughts in a key producing region, according to Burchell.
