January 7, 2011

 

New crop grain prices in UK show increase

 

 

New crop grain prices rose over the holiday season in the UK, narrowing the gap with the buoyant old crop market as supplies from the 2010 harvest dwindle.

 

Feed wheat prices for harvest were around GBP155/tonne (US$239.12/tonne) ex-farm by midweek - slightly down on a few days earlier, but with substantial premiums for those who could guarantee availability in the first two weeks of August.

 

"The market was going through a very bullish phase with new crop being driven by what was happening on old crop, although we would have to be competitive on export markets in new crop", said Jack Watts, senior analyst at the Cereal and Oilseeds Division of the UK Agriculture and Horticulture Development Board (HGCA).

 

The firm's new crop market had echoes of early 2008, when growers had been very reluctant sellers of grain despite high new crop prices, said Mark Smith, grain director at Saxon Agriculture. "However by the time we got to harvest, it had dropped to below GBP100/tonne (US$154.28/tonne). We've probably seen more selling of new crop this time."

 

However, global weather was very benign in 2008. Crop prospects were less settled this time round, said Smith, who advised farmers to watch the market very closely.

 

"There are very good prices on offer and they are there for a reason, but this can change very quickly."

 

Old crop wheat hit the headlines again this week as London feed wheat futures set more new records with July 2011 reaching GBP208/tonne (US$320.99/tonne) delivered. Rising prices over the past five to six weeks have largely priced the UK out of export markets as domestic consumers have sought to secure supplies of a dwindling old crop.

 

Traders estimate that between 10% and 15% of the 2010 crop remains uncommitted on farm. However, the tonnage which that represents is under debate. DEFRA's latest 2010 UK wheat crop estimate of 14.9 million tonnes is thought by the trade to be on the top side.

 

Supply and quality problems caused by flooding and other difficulties in Australia have been another significant factor behind the latest grain price rises.

 

The most recent USDA estimate of Australia's wheat harvest was 25 million tonnes, but industry analysts were already reducing this by up to 2 million tonnes, said Watts.

 

As well as the delay to harvest and now to the logistics of exporting grain from Australia's east coast, which holds much of the country's surplus this year, quality has been dramatically downgraded. Instead of the normal 10% feed wheat share, this year's crop might be 30-60% feed.

 

"The impact of Australia's quality issues could stress the quality wheat market and could have an indirect effect on UK milling wheat premiums," said Mr Watts. Elsewhere, Argentina's harvest is three-quarters finished and of good quality, providing an alternative source to Australia.

 

On the back of poor Australian and Canadian crops, the world may also be short of malting barley next season and contracts are available at firm prices.

 

There was a secure GBP180/tonne (US$277.70/tonne) ex farm on offer for spring malting barley for autumn collection, said Smith. "That's not a bad price to be wrong at - but check the terms."