Cereal market is taking on a domestic perspective

THE impact of recent weather on the UK wheat crop means we could be trading as a ‘domestic’ market at some period in the current marketing year.

That is the view of Gleadell managing director David Sheppard. He believes export opportunities could be severely limited by available volumes and any possible imports – from whatever origin – are currently priced well above today’s UK levels.

“The EU crop is suffering from prolonged rainfall in the west and north, and extreme drought in the east.

“Yield estimates continue to fall and some pundits now put the EU wheat crop – excluding durum wheat – at approximately 115million tonnes,’’ he said. 

“This figure is above the 2006 crop but, of course, we have to remember that the European Commission used 12 million tonnes of intervention grain to boost available supplies for the domestic market last season.

“Much discussion is now focused on the size of the UK crop. If we see a 10 per cent drop in yields the UK crop will fall to approx 14million tonnes and this will leave a very small exportable surplus and could open the way to higher prices,” said Mr Sheppard.

International events, he said, were not now the main driver for UK prices – although they had played a key part in setting current values.

The firm’s oilseed rape trader Jonathan Lane said UK rapeseed prices were comparatively stable.

The market was waiting to get a better idea on yields after the bad weather but early predictions were pegging yields in England at around 3 tonnes/hectare, which would reduce domestic production from to 1.9 million tonnes and the exportable surplus to just 130,000 tonnes.

“This picture has been repeated across the continent, with Germany, France and Poland all reporting significant declines in production,” he said.

He cautioned that the biodiesel sector in particular may struggle to cope with increasing prices and a fall in crush demand could eventually cap this market.