May 26, 2011

 

UK wheat supplies cut to tightest in modern era

 

 

UK officials have forecasted that the country's wheat supplies will end next month at their tightest levels in the modern era, although some believe even this revision may not be the last.

 

The Home Grown Cereals Authority cut by 91,000 tonnes, to 1.51 million tonnes, its estimate for wheat stocks in the European Union's third largest grower of the grain at the close of the 2010-11 crop year.

 

"This creates the lowest stocks-to-usage ratio since 1997-98," the HGCA said, with the data implying inventories finishing 2010-11 at the equivalent of 10.9% of domestic consumption, or less than six weeks of use.

 

The stocks revision reflected lower expectations for imports, which were downgraded by 33,000 tonnes to 1.05m tonnes, and a higher figure for exports, hiked by 335,900 tonnes to 2.44 million tonnes - a rise of one-third on-year.

 

UK wheat has found fresh demand, including its first shipments to Turkey, as buyers denied supplies by Russian and Ukrainian export curbs sought replacement sources, and as France bought in feed grain to replace its own wheat which, even of lower quality, has been finding export orders for food use.

 

This more than offset the impact of a 108,000-tonne cut to food and industrial consumption of wheat, reflecting the mothballing of the Ensus wheat bioethanol plant in northern England, which is due to shut down over the next few days because of the margin squeeze caused by high grain costs.

 

However, even the revised stocks estimate may not be low enough, some observers believe, given that exports have reached 2.34 million tonnes with three months of the crop year left to go.

 

Analysts said that the export estimate indeed reflected an assessment that shipments would tail off sharply. "If they are stronger, it makes the figures difficult to add up," he said.

 

"It implies higher imports, or weaker domestic use, which we both do not expect, and even lower stocks, which it is difficult to see realistically occurring."

 

London's old crop July wheat contract stood 1.0% higher at EUR94 (US$133) a tonne in late deals on an upbeat day for world grains, with CBOT wheat gaining more than 2%, and Minneapolis spring wheat jumping 3%.

 

London's better-traded November contract stood 1.1% higher at EUR93.50 (US$132.33) a tonne.